As with all mortgage types, one of the most important aspects of contract mortgages is the deposit that is put down initially. This will have far-reaching implications on the mortgage and the monthly repayments going forward.
Do contractors have to pay a higher deposit?
The recommended deposit on a contractor mortgage varies dependent upon the individual circumstances – it’s generally agreed that the more you can put down for a deposit, the better deal you’ll get, but this isn’t unique to contractors.
The minimum deposit that would be required is typically 5%, which may be available in the form of a standard mortgage or via certain Government Schemes, which are intended to help first-time buyers get onto the property ladder, similar to the “Help to Buy Scheme”.
Whilst 5% represents the minimum deposit for a contractor mortgage, there is no fixed maximum deposit that you can put down. Variations of the deposits are wide-ranging; however, the cut-off point is often around the 40% mark. The mortgage product and interest rates are tied closely to the deposit that is put down. Of course, this is unique to your circumstances, a broker can help find the best option for you.
Should I be aiming for a 10% deposit?
Whilst it is difficult to predict where you will find the most competitive rates, it is typically understood that the most competitive rates are accessed between the 10% and 25%. When you have established what repayments you are comfortable making, and the deposit that you are able to put down, you will be able to get a fair idea of the purchase price of properties that you can look at. Contractors will be able to attain an appropriate purchase prices through an affordability assessment with a particular Mortgage Provider.
An affordability assessment will indicate to you the level of advance that will be available to you, based upon your income and your monthly ongoing commitments. When this figure is combined with the level of deposit you are able to put down, you will subsequently be given an indication of the maximum property purchase price you could look to buy at.
Just Mortgage Brokers have unlimited access to the UK mortgage including specialist lenders who can support contractors, meaning that we can identify the best mortgage deals for your specific needs. Contact us today to discuss how we can help you acquire a contractor mortgage.