Contractor Mortgages: Who are the best lenders?
Sadly, contractors have always struggled to get competitive mortgages for contractor. As the financial crisis deepens, this means that contractors will often miss out on the dream home as they face even more barriers towards obtaining a competitive mortgage rate from high street lenders. Whereas, people in permanent employment have attracted favourable rates due to lenders having an unfair bias towards them.
This is because contractor mortgage broker view permanent workers as less of a risk than contractors.
Unfair as it may seem, this bias is still strong today if not worse due to the financial crisis.
Help is at Hand!
Over the years, as the contractor market has grown and expanded, some professional organisations and institutions including PCG, Social Networking sites, Contractor Accountants, Recruitment agencies, and Financials advisors have worked hard to convince some banks to view contractors differently.
This has given birth to Contractor Mortgages!
It enables contractors working through different trading structures to obtain a mortgage.Some mortgages for contractor specialiseshave lobbied to get lenders to alter their lending policy towards contractors. Still, has meant that banks are reviewed their traditional underwriting criteria to accommodate contractors.
It is now possible, irrespective of whether you operate through a limited company or umbrella company assessed on your contract rate. In essence, this means that you no longer have to provide financial accounts, payslips or P60s which often don’t reflect your potential affordability.
How much can you borrow based on your contract rate?
Those Mortgages for acontractor who offer mortgages for contractors will work just from a generous multiple of your annualised contract rate (up to 4.5 times income). By making use of your contract, this circumvents the need for providing company accounts, pay slips or tax returns.
Use the Mortgages for contractor
Therefore an IT Contractor earning £500 per day on a 6 month rolling contract can potentially borrow £540,000. To calculate how much you can access, multiply your daily contract rate by the number of days you are contracted to work for a week and then by 48 weeks in a year, this can vary depending on the lender (non-IT contractors is 46 weeks). You can typically secure a mortgage loan of approximately 4.5 times this total figure.
What about IT Contractors?
Lenders are more familiar with IT contractors as they employ many of them to write specialist code for the back office systems. Many banks employ thousands of IT consultants and coders on a contract basis as projects typically last 6 – 12 months at a time. For this reason, many lenders have a more flexible approach to IT contractors. Some banks have arranged bespoke underwriting providing mortgages for contractor.
Are the interest rates higher for contractors?
Not at all! The same rates available to permanent employees are also available to contractors. This a misconception that a contractor mortgages are expensive.A contractor mortgage broker will be able to source you a rate that is competitive and no more expensive than a standard mortgage available to a permanent employee.
Will it take far no longer to arrange a contractor mortgage?
Not! In fact, it is quicker in most cases as many contractor specialist mortgage advisers will have direct relationships with senior underwriters. As long as you can offer a copy of your contract, CV and bank statements, it should not take longer than 4 weeks, from start to completion.
Good luck with your mortgages for contractor hunt!
Click for more information: www.mortgages4.contractors