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So… you have now reached that point in your career when you have gained good experience and utilised the qualifications you worked for.

The CV is looking like you’re indispensable to your current employer. Maybe recruitment consultants have been dangling those carrots that look like escalating the current salary to new levels? Fancy a new challenge? Is it time to take the plunge and earn some real money as a contractor?

You’d be forgiven for thinking this was an advert from a recruitment agency.  Not quite. A common objection to the above questions regarding contracting as the next logical career step, is also one that recruitment consultants struggle to overcome.  It relates to those potential contractors who have a pending requirement for a mortgage; where a move may be on the horizon, or a pressing need to remortgage.

Obtaining a mortgage as a new contractor

That problem is quite simply, how do you get a mortgage as a new contractor without appearing like a huge risk to a potential lender? A logical question, especially if you obtain mortgage advice from the more traditional sources, such as a bank adviser or conventional mortgage broker.

The fact is that it’s possible for a first time contractor to obtain mortgage funding. Even from the same banks that may have already told you “no” or “not yet”. They won’t do this without the correct direction and some cajoling however. Presentation or “packaging” of a borrowing scenario is as important as the fundamental evidence of income that lenders require. If too little information is supplied, there may be delays or unreasonable referencing requests. If too much is supplied, then further questions that complicate the underwriting decision may arise.  Particularly around how salary and dividends are structured, or why certain payroll/umbrella services do not have clearly identifiable credits on the bank statements. 

Some contractor mortgage experts have been advocating soft conversations around potential mortgage requirements prior to making the leap into contracting.  Taj Kang, Associate Director at Contractor Mortgages Made Easy, is very familiar with would-be contractors deferring good contract opportunities until they have secured their mortgage.

“Fundamentally changing the way in which you work is obviously a big step, and when you forego some of the security of being an employee, the last thing you want to do is to leave yourself high and dry when it comes to a mortgage application. However, taking a new contract for the first time and successfully obtaining a mortgage offer is not an “either or situation.” 

“As you would in most situations, it is important to engage the relevant financial professional to understand the permutations of a major decision like this. A tentative conversation around mortgage options after a potential contract is taken up, could go a long way to providing some reassurance and remove one of the largest obstacles in making the decision to contract or otherwise.”

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