Integra News Contractor Mortgages
So, what is a contractor mortgage?
A contractor mortgage is a mortgage with bespoke lending criteria that lenders will offer to people on a fixed-term contract. A traditional method that lenders use is treating contractors as self employed, which is much less beneficial to a contractor.
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How will my yearly income be calculated?
To calculate the mortgagee’s income, lenders will take their day rate, multiply that number by the number of days they are contracted to work during the week, and then multiply that number by 46 to find out their yearly income. If the buyer is paid hourly, then the lender will multiply this number by 7 to calculate the daily rate.
How long do I need to have been working for?
Most lenders will want to see that the buyer has had a 12 month history in contracting, however, some more flexible lenders will be willing to lend to the buyer from day 1 of their current contract, so long as the buyer has a 3 year record of working in that field of employment.
Are there any areas of concern with contractor mortgages?
There are 3 things to be aware of with contractor mortgages that can cause complications.
- Any gaps in contract. Most lenders will be happy to lend to people with up to 6 weeks gaps in contract within a year, but anything more can become problematic.
- If there are 3-6 months left on the contract. If this is the case, lenders will want confirmation that the contract is likely to be renewed once this time is up.
- If you work more than 7 hours a day, depending on the lender, your income will be based on those hours, regardless of whether or not you work more than this, so this is something to be aware of.
What are the benefits of a contractor mortgage?
A great benefit to a contractor mortgage is that lenders will use your gross contract value rather than your net profit, which is what they use for the self employed. Net profit is the number calculated after expenses are deducted, and this is much lower than gross contract value.
Another benefit is that if you are treated as self employed, lenders will want to see 2 years proof of income and a 2 year track record in that profession. But, if you get a mortgage as a contractor, you will only need to provide a maximum of 12 months’ proof of income and can even get a mortgage from day 1 of your current contract.
So, are you interested in getting a contractor mortgage? We hope that this answered any queries you had about contractor mortgages, however if we didn’t, you can feel free the contact us via our
Telephone: 0117 251 0083
PLEASE NOTE: A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. We offer a comprehensive range of mortgage products from across the market. We offer both first and second charge mortgages, but not deals that you can only obtain by going direct to a lender. For those seeking to increase their existing borrowing, alternative finance options may be available and more appropriate for your needs. For example, a further advance from your existing lender or an unsecured loan (e.g. a personal loan).