Securing a contractor mortgage is something that puts many self-employed professionals off the idea of owning their own home, often preferring to continue renting. But are they really that hard to secure?
When you’re working contracted hours, it can appear impossible to secure contractor mortgages. However, there are many things you can do to position yourself favourably in the eyes of potential lenders.
So, here are some priceless tips to help you get a contractor mortgage:
Know your contract, and ensure it’s up to date
When you’re considering putting together a mortgage application, make sure you have copy of your most up-to-date contract to hand. It’s important to be able to show lenders not only how much income you have, but also the period remaining on your contract.
Avoid lengthy breaks between contracts
Working as a contractor has many perks, not least being able to take career breaks between contracts when you wish to. This is perfect for holidays and such like. However, avoid taking breaks of more than 6-8 weeks and certainly do not take regular lengthy breaks. Lenders want to see consistent income and contracts stretching back 12-24 months prior to your mortgage application and gaps between income will not be viewed favourably.
Be realistic and keep things affordable
One mistake that many professionals make when looking at mortgages for contractors is they are unrealistic when it comes to estimating affordable repayments. Lenders will see right through this. When you put your mortgage application together, make sure the repayments you commit to are affordable.
Pay at least a 10% deposit
Lenders will require you to have a sizeable deposit ready when you apply for a contractor mortgage. It wasn’t all that long ago that you’d have been able to secure a mortgage on just a 5% deposit, but these days are now gone. Aim to have 10% ready to pay upfront at least.
Avoid high-street lenders
For contractors, securing a mortgage from a high-street lender is where the difficulties start. You may find that your initial application is accepted due to only very light and superficial credit checks that will be performed. However, once you place an offer on a property, high-street lenders will often do a more in-depth review and withdraw.
Instead, do some homework and look for specialist lenders. Companies that are both experienced and specialists when it comes to mortgages for contractors are much more likely to give favourable results. Using a professional mortgage broker within this field can also be invaluable.
If suitable, identify mortgages that allow additional payments
For some professionals looking at mortgages for contractors, they can find themselves cash-rich on a regular basis thanks to particularly high-value contracts, and frequent contracts. If this sounds like you, then try to find mortgages that allow you to pay chunks off in addition to your regular monthly repayments. This will help you to take advantage of your position and pay-off more of your mortgage quicker.