Just a few years ago a high loan-to-value (LTV) contractor mortgage would have represented far too much risk for most lenders to accept. Not only is there the additional risk of a small deposit, but there is also the variable income and perceived lack of security associated with life as a contractor. However, in recent years, as the economy has continued its post-credit crunch recovery, much has started to change.
The lending criteria is understandably strict, and there are fewer lenders offering high LTV contractor mortgages than mortgages for contractors with a larger deposit, but they are out there.
What Kind of Deals are Available?
The truth is that the 100% loan-to-value mortgages we saw before the financial crisis are virtually a thing of the past, but any contractor, in any sector, regardless of their experience, should now be able to secure a 90% mortgage and in some cases up to 95 percent. For those that are unable to get a 10% deposit together, the Government’s Help to Buy scheme is another way to potentially enable a purchase using a 5% deposit.
Generally speaking, the greater the loan-to-value, the higher the interest rates are likely to be, and this is certainly something contractors should factor into their repayment calculations. A contractor paying a 25% deposit will typically receive better rates because they represent far less risk.
Securing a High LTV Contractor Mortgage
These days, thanks to the sheer number of specialist contractor mortgage lenders out there, and the unique way the affordability of contractor mortgages (using the contractor rate) is assessed by certain lenders, contractors can even access exclusive mortgage deals which are not available to employees.
To access a high loan-to-value mortgage, all a contractor typically needs is a signed, accurate and up to date copy of their current contract. It does not always matter how long you have been contracting and you do not necessarily have to produce accounts. Even if it is your first contract you may still be able to apply.
In Real Terms…
In terms of the amount you can borrow, this can sometimes be based on your daily rate annualised and multiplied by somewhere between four and five, depending on the lender. As an example, if you earn £300 a day, that would be an annual rate of between £70,000 and £75,000, this could allow you to borrow between £300,000 and £375,000, even if it is your first contract.
How Can We Help?
Want to know more about how you can get a contractor mortgage, even with a high LTV? Simply get in touch with our specialist advisers for a no-obligation discussion of your circumstances.