Contractor Mortgages

This is a simple statement that we do not agree with.

Instead of rushing through the process, we prioritize understanding your unique needs and work style. By doing so, we are able to effectively present your mortgage application to the decision makers and improve its appeal to underwriters.

It is crucial to have a direct connection with them and understand their criteria. Without such a bond, the affordability evaluation of a standard mortgage consultant would be inadequate.

It is likely that the advisors you have consulted with have requested a large amount of accounting paperwork. Despite fulfilling all of their requests, they have ultimately rejected your application, correct?

It is not unexpected that a mortgage advisor from a building society or high street bank would have a narrow perspective on mortgage funding. They are familiar with their own system and calculations, and are well-versed in identifying suitable applicants. However, anything outside of their scope is often disregarded.

Fortunately, you can set aside those restricted company records because we do not require them. Our focus is solely on your most valuable asset: your contracted day rate.

 High Street mortgage rates, zero payslips, and accounts are now easily accessible

Our services cater to all types of trading vehicles and payment structures for contractors. There are various options available, as each business model and owner’s status may differ from one another.

Whether you are working through your own limited company or a UK payroll umbrella, our team is well-equipped to evaluate your relevant income for lending considerations.

Are you using contractor accounts for a limited company or receiving payslips from an umbrella company? Keep in mind that they do not accurately represent your ability to afford a mortgage.

The task of optimizing tax efficiency falls under the responsibility of your accountant. However, the resulting financial records may not accurately represent your actual disposable income.

Additional positive update: our underwriting model based on contracts eliminates the requirement for accounts and SA302s. Incorporating retained profits provides a more precise method of evaluating the actual mortgage affordability for contractors.

It might be unexpected, especially considering the difficulties you’ve faced with traditional lenders. However, we are not following the usual High Street path.

 The advantages of using a contract rate as the basis for determining mortgage affordability

In our interactions with numerous mortgage lenders and their underwriters, we have discussed the utilisation of contract rates as a means of determining a contractor’s affordability. Our goal has been to demonstrate the effectiveness of this approach through discussions at the table.

The evaluation of self-employed individuals by the accounts they are familiar with is deceiving. The actual value of an independent contractor lies in their retained profits. The accounts and tax returns do not accurately reflect their financial capabilities.

While some lenders chose to partner with us, others decided to distance themselves from us. However, there were also those who took the opportunity to reconsider and agreed to support contractor mortgages.

This is due to the fact that they are able to provide customised mortgage options for contractors through us. 

Utilising your contracted day rate to secure a larger mortgage

The headline is not just about being able to borrow, as there is even more positive news.

By utilising your daily rate as stated in your contract, you have the opportunity to secure a larger amount for a mortgage loan. On the other hand, if lenders adhere to their typical assessment standards, your chances of obtaining a loan are slim.

The calculation of your affordability will be based on your post-tax ‘salary’ and dividend drawings. After an accountant has performed their calculations, this ‘salary’ would only qualify for a small mortgage offer.

Calculating the maximum amount you can borrow for a specialised contractor mortgage

In order to maximise your contract rate, it is important to begin by considering your day rate. If a lender is not in agreement with this approach, it should be viewed as a potential warning sign.

Use this ” How much i can borrow” form  to determine your borrowing potential using a straightforward formula. If previous lenders have given you inadequate offers, this information may come as a surprise.

To determine your mortgage affordability, lenders use a “multiplier” that is calculated by taking your current contractor day rate and multiplying it by the number of days you work per week (typically 5). This result is then multiplied by 46 weeks, which is the number of weeks used to calculate your annual salary. Finally, your annual gross salary is multiplied by a factor of 4.5. This process is used by lenders to accurately assess your mortgage affordability.

List of Required Documents for Mortgage Application by Contractors

At the core of contract-based underwriting, lies simplicity. This effectiveness also applies to the records we require from you.

In order to meet the requirements of underwriters for your contractor mortgage application, we will require copies of the following documents:

• Current Signed contract confirming your day rate, start date and end date
• Latest curriculum vitae*;
• Latest months bank statements where contracted income is received
• Proof of ID
• Proof of address

Our strong relationships with lenders have been built through years of hard work, but the effort has been worth it.

For the purpose of lending, we have simplified the criteria for determining relevant contractor earnings. No documentation such as accounts or payslips is required. Instead, we consider your contract rate, which may include your retained profits.

In urgent need of a mortgage?

The use of contract-based underwriting can expedite the mortgage process due to the minimal number of documents required. This can be beneficial when time is limited, as eliminating unnecessary steps can save time.

If you require a “decision in principle” we are also able to assist with that. This can serve as a valuable negotiating tool and provide you with an estimate of your borrowing capacity.

In the event that two individuals are in pursuit of the same house, the seller may show preference towards one of them. This is just one benefit of reaching a decision or agreement in principle.

Having an understanding of the amount you are eligible to borrow for purchasing a house can be beneficial. It can assist in narrowing down your search and having a limit in mind. Additionally, an AIP (Agreement in Principle) can serve as an advantage if you require a quick start to the process.

The variety of mortgage products available for contractors

Based on our experience, we have found that contractors at every level of the property market require assistance. This includes access to various options for repaying their mortgages.

If you are a new home purchaser, relocating, or seeking to refinance for a more favourable interest rate, we are here to assist you. Our selection of contractor mortgages is suitable for almost all individual situations.