As a contractor or freelancer, you may find it difficult to find a mortgage. This is down to the fact that you may not receive a regular income and because you’re not employed by an employer, which poses more risk to a bank. But, contrary to popular belief, it is possible to obtain a mortgage as a contractor and there are certain steps that you can take to enhance your chances of securing the right mortgage.
What are contractor mortgages?
Working as a contractor, be it in construction or as an IT contractor, can provide you with some great personal benefits – it can allow you to be your own boss and give you the power to dictate your own hours and time off. However, when it comes to trying to find a mortgage as a contractor, you may be met with difficulty. But rest assured, there are still many mortgage lenders out there that are willing to provide you with the right mortgage for your needs and circumstances.
However, you might not know the best place to locate these lenders that specialise in contractor mortgages, which is why we highly recommend that contractors looking for a mortgage seek the help of expert mortgage brokers, who can find the most suitable mortgage deal from lenders that provide contractor mortgages.
Getting a mortgage when you’re paid a day rate
There are some lenders out there that may be willing to calculate your annual income on the basis of your day rate, but many require you to have a 12 month contract for this to be done. This approach can be particularly useful if you do not have an established track record or if you have only just left full-time employment.
What can I do to strengthen my application?
When you apply for a mortgage, the lender will generally look at how much you earn, your expenses and how secure your income is. The mortgage lender wants to feel confident that they have an accurate picture of your finances, so it’s essential to provide as much evidence of expenses and operating costs as possible, including bank statements.
As a contractor, you will need to provide evidence of your earnings for at least the past six months, although some lenders will expect to see two or three years of accounts. The bank will decide the amount you can borrow based on an average of what you’ve made over recent years.
Get a larger deposit
A larger deposit provides more security to your mortgage application, as it means that you borrow a smaller amount and the bank will view your application more favourably, it’s a win-win situation.
Arranging a contractor mortgage will be more complicated than a standard mortgage and it may require special underwriting which is why we recommend using a broker like us, who can take out all the exhaustive legwork for you and find you all the lenders that are willing to provide contractor mortgages.
Here at The Mortgage Consultancy, we can help you secure a mortgage that’s suitable for your needs and circumstances as a contractor.