Advice to Get You a Contractor Mortgage

 Many contractors think that they can't get a mortgage, but nothing might be beyond reality. Admittedly, getting a mortgage as a contractor isn't as easy as once you are a full-time, PAYE employee but that doesn't mean to mention it's impossible. In fact, many lenders have specific products that they aim at the self-employed and contractor company owners than getting a mortgage is certainly an option.

In this post, here are some recommendations on applying for a self-employed mortgage and that we are watching how lenders assess your application and what you'll do to extend your chances of getting accepted for a loan.

What Are Contractor Mortgages?

In truth, there's no such thing as a ‘contractor mortgage’. In fact, the mortgage product is going to be an equivalent for all the lender’s customers, but they'll prefer to badge it in a different way and possibly apply different lending criteria once they assess the appliance.

There are a few details here though; first, don't assume that because a lender doesn't have a selected contractor product that they're going to not consider applications from contractors.

Secondly, don't just take a product because it says ‘mortgage for contractors’ on the wrapper. the merchandise you're offered might not be the foremost competitive in comparison to other loans out there.

What Lenders Want

• home as office
• In stable employment.
• Have few debts (but not none).
• Have an honest credit history.
• Have had a mortgage before.

Lenders got to achieve a particular rate on their loans but also, they need a risk element that defines what kind of borrowers they appear at and therefore the sort of deals that they are doing.

The people they love the foremost are:

The properties they wish to lend on are standard houses, easily re-sellable, and have an honest loan to value ratio. So, people with an outsized deposit stand the simplest chance.

As soon as you progress faraway from these criteria then borrowing becomes harder and therefore the rate of interest increases.

Getting A Mortgage – Things to seem Out For:

Mortgage products have a spread of features that lenders use as how of providing a return for the danger that they're taking.

For contractors trying to find a mortgage, it's important to remember those as they'll well differ widely between different companies. The rate of interest charged is that the best-known way that lenders vary the return on their loans, and this is often what many of us check out first. Some lenders will offer a special low interest starting rate or for a hard and fast term however you are doing got to inspect what the rate of interest is going to be once you get out of the initial period.

Of course, the interest charged is vital but there are other things that will make more of a difference to the general cost.

The set-up fee can often be substantial, and this may vary between lenders and may often be used as how of creating up the return to the lender once they offer a coffee headline rate of interest. A sizeable fee also can be charged once you leave your lender, either because your mortgage has run its term or more likely because you've got found a far better deal.

One aspect of mortgages which will be very helpful for contractors is where there's an offset facility. this suggests that any savings kept during a special offset account are counted towards the quantity owing on the mortgage. Most contractors will have money sitting during a tax accountant to pay over to HMRC at the top of the year then combining this with a mortgage offset is sensible.

The main message here is to form sure you go searching and compare all the features of the various mortgages before you apply.

Boost Your Chances Of A Successful loan application 

Lenders are required by law to assess the affordability of any loan that they provide, and this is often arguably the second most vital criteria they assess.

You need to be ready to show that you simply can easily afford the monthly payments of the loan then reducing your outgoings may be a good idea. Spend a while completing a budget and removing expenses that, after all, you not need.

Boost your chances of a successful loan application 

At an equivalent time, a lender will check out your income, and for contractors, they will do that in several ways:

• If you're an Ltd. then they're going to certainly check out your PAYE income then boosting this is often an honest idea. Many lenders also will take under consideration dividend payments you're taking from your company so within the months before you create an application, increase the quantity of income you receive from your business.
• If you're self-employed then the lender will want to ascertain evidence that you simply have a uniform level of income and that they may ask to ascertain your bank statements and tax returns.
• Overall, what they're trying to find maybe a consistent level of income over a minimum of six months and possibly up to 3 years which you'll meet the affordability test.
• If you're on each day rate, then lenders wish to see that you simply have a longer-term accept the place and like it if there are no long breaks in add the recent past so avoid taking a couple of weeks off just before you set a loan application in. contractor insurance

The type of property that lenders will consider also tends to vary. Some won't consider flats with shared entrances; others won't lend against houses during a poor state of repair. In fact, every lender varies in their approach then you would like to try to do your homework.

Ask the lenders what properties they like and choose one that matches their criteria. Most lenders will check out your credit score and whilst this is often not always a make or break for a contractor mortgage, it's naturally better to possess an honest score.

Many credit scoring services like ClearScore or Experian offer free accounts and have methods of improving any credit record that needs help.

Summary: Contractor mortgage applications

We hope that our advice has made the method of finding the simplest contractor mortgage easy to navigate and increased your chances of aged your hands on the keys to your new house! simply because you're a contractor it doesn't mean that you simply cannot get a mortgage, but you are doing got to do a touch of groundwork first.

Before you begin, begin taking extra money out of your company within the sort of salary or dividends. Then check out your credit score and take action to enhance it where necessary. Do your research into various lenders and what sorts of property they lend on and what they wish to see from their borrowers; a broker might be very helpful here. Finally, once you do choose your house, confirm it fits in together with your lender’s criteria which you've got as large a deposit as possible.

In addition, as Cheap Accountants in London, we offer accounting services to many Contactors throughout the UK. Whether it's advice on IR35 status (link to IR35 blog) or planning on how best to require your Salary or Dividends, give us a turn the amount above to talk to at least one of our experts, or book your free consultation to talk through any questions you'll have.