How Much Contract History Do I Need?

How Much Contract History Do I Need?

It’s likely you’ve heard that all contractors need at least 3 years of accounts to get a mortgage. Well, they don’t. If you thought you were locked out of the mortgage market because of an insufficient contract history, the good news is you can still get a competitively priced mortgage, even if all you have is a copy of your current contract.

Contractor mortgage documents have always been a stumbling block for contractors trying to secure a loan. Since the financial crisis, the self employed have found it harder than ever to find a competitively priced mortgage. This in addition to notoriously tough lending criteria made it more difficult to prove loans were affordable. Most lenders also insisted on seeing at least three years of accounts. The result was that a contractor with 1-year accounts would really struggle to access a mortgage.

The good news is that a specialist group of lenders has entered the market and made the requirement for 3 years of accounts a thing of the past.

What is the situation now?

The lending criteria above is still very much the norm with the majority of mainstream lenders. A small number of high street lenders have recently started considering self-employed contractors with 1-year accounts. However, the real flexibility comes from the growing number of contractor mortgage specialists that have entered the market. In some cases, they will not need to see any contract history at all.

When you apply for a mortgage through a specialist contractor mortgage broker, they will not expect to see the same contractor mortgage documents as the mainstream lenders. They will also understand that your salary and dividend or net profit figures do not necessarily reflect your affordability. Using this knowledge, the broker will be able to package your mortgage application in the best way to show the specialist underwriters your true earnings and affordability.

Which contractor mortgage documents do you need to have? 

Specialist contractor mortgage lenders are not overly concerned with your contract history, as what you’ve earned in the past has little bearing on your future earning potential. However, you will need to provide:

A copy of your current contract

A lender will want to see how much you are earning and how long you have to run on your current contract. If the contract is coming to an end, they may ask you to get a promise of an extension from the client or agency.

Bank statements for the last 3 months

This is to check you have been working regularly and earn the stated amount.

A copy of your CV

Some lenders will also want to see a copy of your CV so they can match up your work history to the field in which you are seeking work as a contractor.

Proof of ID

Lenders will want to be sure who they’re lending to and will also want to check your credit history.

Although some lenders may ask to see some evidence of your contract history or other applicable contractor mortgage documents, the above will be sufficient to secure a mortgage with a specialist lender. This is particularly good news for contractors, freelancers and the self-employed who do not have sufficient accounts.

What’s next? 

To discuss your contract history or the contractor mortgage documents you’ll need to secure a competitively priced contractor mortgage, please get in touch with our team today.