For many of our contractor clients, the flexibility that comes with their career is what makes contracting attractive. Working as an Interim, contractor or freelancer allows you to be selective with the assignments you work. Having this flexibility also provides the opportunity to take planned career breaks or work abroad.
One of the most common challenges that comes with being self-employed is around gaining finance. Whether this be for a mortgage or personal loan, it can be a challenge.
How many people are ‘self-employed’?
As it stands there are approximately 4.8 million self-employed in the UK today, many of whom are expats and foreign nationals on long term contracts, returning or relocating to the UK. When it comes to buying a house, these employees can represent some of the highest quality lending for banks, as they are often highly skilled specialist, commanding long terms contracts in well paid roles.
How do I get a mortgage if I’m a contractor?
Many self-employed professionals believe that it’s almost impossible to get a mortgage as a contractor and would therefore rather continue renting than attempt to buy their own home. But are contractor mortgages really that hard to come by?
As a contractor, it can certainly look like a tough proposition to secure a mortgage but there are many things you can do to position yourself favourably in the eyes of potential lenders.
Our friends at CMME has put together a list of handy tips to help you secure a contractor mortgage:
Ensure your contract is up to date
Make sure you have a copy of your most recent contract to hand when putting together your mortgage application. It’s important to be able to show lenders not only how much income you have, but also how long you have remaining on your contract.
Avoid lengthy breaks between contracts
There are many perks to working as a contractor, not least being able to take breaks between contracts should you wish to. This is great for holidays or similar. However, you should try and avoid taking breaks of anything more than 6-8 weeks. This is because lenders want to see consistent income and contracts stretching back 12-24 months prior to your mortgage application – long gaps between income are not viewed favourably.
Be realistic about your repayments
A common mistake many professionals make when searching for a contractor mortgage is being unrealistic when it comes to estimating their repayments. It’s really important when putting your mortgage application together that you make sure the repayments you commit to are going to be affordable for you.
Have at least a 10% deposit
Most lenders will require you to have a good-sized deposit when you apply for a contractor mortgage. Not so long ago it was possible to secure a mortgage with just a 5% deposit, but those days are gone now. Ideally, you should aim to have at least a 10% deposit ready to pay upfront.
If suitable, look for mortgages that allow additional payments
Some contractors may find themselves with more money than they need on a regular basis thanks to high-value or frequent contracts. If this sounds like you, you should try to find a mortgage that allows you to pay chunks off in addition to your regular monthly repayments. This will enable you to take maximum advantage of your position and pay-off more of your mortgage quicker.
Give the high-street lenders a miss
Securing a mortgage from a high-street lender is where the difficulties start for many contractors. You may find that your initial application is accepted in principle due to their very light and superficial credit checks. However, once you’ve placed an offer on a property, high-street lenders will often do a more in-depth review of your finances, and then withdraw at a later stage.
Instead, we suggest that you do your homework and look for specialist lenders. Companies that are experienced specialists when it comes to contractor mortgages are much more likely to produce favourable results. Also, using a professional mortgage broker within this field can prove invaluable.
For further information or to speak with an adviser follow the link below: www.cmmemortgages.com/icontract
CMME is a trading name of CMME Mortgages and Protection Limited. Authorised and regulated by the Financial Conduct Authority (FCA reg. 414798). Registered in England No. 04886692. Registered Office: Albany House, 5 Omega Park, Alton, Hampshire, GU34 2QE. Please be aware that Commercial Mortgages, Overseas Mortgages and some Buy To Let Mortgages are not regulated by the Financial Conduct Authority. Calls may be recorded for training and security purposes and to improve the quality of our services.