Contractor Mortgages

There are nearly 1.5m Contractors working in the UK

Mortgages for a Contractor used to be a difficult process. Contracting in the UK started around 1996 and has gone from strength to strength ever since then and it is now a familiar sight in any company. All UK lenders have had to adapt to embrace this income stream and offer Contractor Mortgages.

Contractor Mortgages South Coast

What is a Contractor?

Contracting in the UK has been around for many years – but only became official in about 1996. Why? Because South Africa was admitted back into the Commonwealth in 1996 and many young South Africans came over to London and began working for companies in the most tax-efficient manner possible. This form of employment is in almost all industries.

How easy is it to find a mortgage if you are a contractor?

It used to be almost impossible for a Contractor to get a mortgage. Today there are a range of lenders who offer reasonable rates for the nearly 1.5 million people who are Contractors. It is a big market; however, you will need to look further than the High Street in order to get the best deal. We have relationships with many lenders who are familiar with how Contractors work.

How do you prove your income?

Not with payslips and salary indications – forget it. Most lenders for Contractors want to see the offer letter from the employer/agency, the proposed hourly/day rate, at least 1 set of accounts filed with Companies House and your bank statements as evidence of income received.

Will my professional circumstances affect the kind of mortgage I can get?

Fundamentally it is the same as being self-employed. If you are young, upwardly mobile have been a Contractor for a few years, and your income is rising, then there will be no problem. New to Contracting or declining corporate income - then your proposed LTV (loan to value) will be inevitably lower.

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How will the mortgage rates be affected by my employment status?

Just as if you were Self-Employed, the rates will be different if you are a Contractor – no doubt about it. Rates will always be higher if there is perceived increased risk to the lender. However, it is invariably not that much higher. The same principles will apply as for traditionally employed people: regular income, provable income, taxable income, sustained income. Lenders are happiest to lend in the face of the least amount of risk.

What information do I need for Contractor mortgages?

There is no hard and fast rule, but suffice to say at least one year's worth of accounts filed with Companies House – this is a public record and can be checked. The minimum income required by most lenders is around £50,000. You need experience in the industry and a current contract with a day rate clearly shown and evidenced in your bank account.

BRAM VIS
Frequently Asked Questions: 

What is conveyancing?

Conveyancing refers to the legal work completed by the solicitor or conveyancer you choose when buying or selling a property. It’s important to have either a conveyancer or a solicitor already lined up because as a buyer or a seller, you will need this in place to start and complete your transaction.

How do I prove my income?

If you are employed, you will need to provide at least your last 3-4 months payslips as a guide, your P60 from the last tax year and your last tax return if you have done one. If you are self-employed, the easiest way to prove your taxable income is via SA302s, which can be obtained (for free) from HMRC. Alternatively at least 2 years' trading accounts may also be acceptable to lenders. Some lenders may have other requirements. You will be required to provide your bank statements for the last 3-4 months as well. If you have any other form of income i.e tax credits, then written evidence from the provider will be required.

What if I want to rent out my house?

In the first instance you should seek permission from your Mortgage Lender. Your lender may increase the interest rate to reflect the change in risk, as you need a specific Buy-2-Let Mortgage. We can provide you with advice on your mortgage and insurance options. Remember that you may also need to change the type of building insurance you hold on the property to ensure it is appropriate for this purpose.

Where can I get more information?

Please visit our FAQ page here or contact Bram directly and/or get a confidential & professional call back from Bram here.

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020 7504 1090

Isle of Wight office:

01983 642 643