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Contractor Mortgages by Trinity Finance
As a contractor, you may be concerned about the hurdles you have to overcome to secure a mortgage for your dream home. You may receive a fixed rate or day rate, have a limited company or work under an umbrella company, be new to contracting or only have a short term left on your existing contract.
Whilst these may previously have been obstacles in your search for a mortgage, lenders have now recognised the growing number of contractors and freelancers in the UK’s workforce and have changed their assessment criteria accordingly, providing you with a more tailored approach.
At Trinity Finance, we know which lenders specialise in mortgages for contractors and how to prepare your application for the optimum chance of success. Our professional mortgage brokers can guide you on how to strengthen your application and advise you on the documentation needed to maximise the loan amount you qualify for. They can present your case to lenders in the most effective way and search for the best mortgage deals to suit your circumstances, ensuring a seamless process from start to finish.
How much can you borrow?
To decide how much they’re willing to lend you, lenders carry out an affordability assessment. This takes your income and expenses into consideration as well as the reliability of your income. Gone are the days when lenders assessed contractors in the same way as salaried employees. The assessment criteria now used recognises that you have an irregular income, may receive payments in various ways and possibly have a lack of trading history as a contractor.
Using your gross contract value
To calculate your gross annual income, lenders can use your hourly or daily contract rate. Usually, your day rate is multiplied by the number of days you work per week and this is then multiplied by the number of weeks you work in a year. As lenders allow for gaps between your contracts and holidays you take throughout the year, this tends to be based on 46 weeks. When you have this figure, it is multiplied by the lender’s affordability factor, which is usually 4.5.
For example, when you work 5 days per week at a daily rate of £300, you earn £1,500 each week. For 46 weeks, this makes your annual income £69,000. Multiplied by 4.5, the resulting figure of £310,500 is the amount the lender is prepared to loan you.
If you have a limited company
In this case, different affordability criteria may be used. Instead of your total earnings, the salary and dividends you receive may be used as your income figure. If you are drawing a low salary but your limited company is profitable, a lender that provides specialist underwriting is better equipped to help you. Your full accounts will be taken into consideration in this scenario. Another option is to use your director’s salary and your share of the company’s retained profit. As long as the retained profit is higher than the dividends, this can increase your borrowing potential.
Whether you work under an umbrella company or have a limited company, our expert mortgage brokers in Kent, London and Edinburgh are ready to discuss your situation and help determine how much you can borrow. Get in touch with us on 01322 907 000 to speak with a mortgage consultant or send an enquiry via our contact form and one of our specialist brokers will reply to you as quickly as possible.
What paperwork is required?
You need to provide as much information as possible about your financial situation to make lenders feel confident about offering you a mortgage. They generally require:
- A copy of your current contract
- Proof of your ID
- A copy of your CV
- Proof of your deposit
- The last 3 to 6 months of bank statements
- Evidence of your operating costs and expenses
- Details relating to your predicted income from future contracts
It’s also helpful if you can provide details of previous contracts as this shows lenders that you benefit from having consistent work.
How are you assessed if you are new to contracting?
Lenders understand that you may have a short trading history as a contractor or no previous history if this is your first contract. In this case, they will require evidence of your current contract, which confirms your rate. If you’ve been operating as a contractor for a short term and have previous contracts, they will need to see those too and you will also need to provide evidence of future agreements.
What mortgage deals and interest rates are available to you?
As a contractor, you have access to the same mortgages as everyone else. Our expert brokers will discuss the various mortgage types with you so that you can decide which is best for your circumstances. At Trinity Finance, we benefit from having access to an unrestricted range of first and second charge lenders, which means we are not tied to specific ones and can search for the best deal for you. We also have access to mortgages that aren’t advertised publicly by lenders so have a wider scope to search with than if you approached lenders yourself.
The interest rate you pay will be determined by several factors. These include the type of mortgage you choose, the amount of deposit you pay, the length of your mortgage term, your income and your status as a buyer, such as a first-time buyer or an existing homeowner looking to remortgage.
How to strengthen your application
There are various ways to ensure your application is successful and to increase the mortgage options that become available to you. These include making sure that your current contract is up to date, minimising the breaks between your contracts, checking that the information on your credit report is correct and improving your credit score.
One way to achieve more competitive rates is to pay a larger deposit. If you’re struggling to save an adequate deposit, our mortgage consultants can offer you advice on schemes that can help you with this or ways that family members can help out. When you’re looking to buy with someone else, a joint mortgage is a good way to save a bigger deposit and increase the loan amount offered to you by lenders.
When applying for a mortgage, it’s important to be realistic about the monthly repayments you can afford to make, bearing in mind that your income may fluctuate. It’s also worth asking if your mortgage gives you any flexibility to make overpayments when you benefit from an increased income.
Our qualified mortgage brokers can help you prepare the necessary paperwork for your application. This ensures you will qualify for the maximum loan amount possible and that all of the relevant documentation is included to be certain that lenders offer you a mortgage. They will carefully select the right lender when submitting your application, not only providing you with a quick outcome but also preventing multiple lenders from carrying out credit checks and damaging your credit score in the process.
We can secure a competitive mortgage deal for you as a contractor
With a wealth of experience when it comes to mortgages for contractors, our specialist brokers in Kent, London and Edinburgh can find the best deals for you with competitive rates. Give us a call on 01322 907 000 for expert advice on how to proceed or send an email to us at email@example.com. We provide a tailor-made service to ensure your mortgage application is processed quickly and efficiently with a successful outcome.