Understanding Contractor Mortgages: A Guide

In simple terms, a contractor mortgage is a mortgage application that follows a different assessment process compared to standard PAYE (permanent) or self-employed applications.

Most lenders tend to categorise applicants as either permanent employees or self-employed individuals, which can pose challenges for contractors. Contractors often face difficulties in proving their income, especially when they receive payslips from umbrella companies or have limited taxable income in their company accounts.

A contractor mortgage, however, offers a unique approach by allowing lenders to evaluate your borrowing potential based on your contract value.

For example, if you’re an IT contractor operating outside IR35 through your limited company, working on a £600 per day contract, a standard mortgage broker might advise you to demonstrate three years of accounts. The lender would then assess your income based on the average salary of £12,000 and dividends of £40,000 over the past three years, resulting in an income assessment of £52,000. In contrast, a contractor-friendly lender could assess your income based on £600 per day, five days a week, and around 46/48 weeks, allowing your income to be declared at £138,000.

The way you present your financial situation to a lender can make all the difference between securing your dream home and settling for less.

Why Choose a Contractor Mortgage Specialist?

Much like how your end clients value your expertise, a contractor mortgage specialist is essential because:

  • They understand the unique challenges contractors face.
  • They possess years of experience in the contractor mortgage market.
  • They know how to structure your application to maximize your borrowing potential.
  • They can secure the best interest rates based on your specific situation.
  • They understand what lenders require to accept your particular circumstances.

The team at MyContractorBroker has been serving the UK contractor market for over a decade. They’ve not only accumulated a wealth of knowledge about contractors but have also built strong relationships with key decision-makers within lending institutions to ensure that your application is assessed accurately.

What Documents Will You Need to Support Your Application?

While the specific documents required may vary, lenders often request the following:

  • Proof of identity and address for all applicants.
  • An up-to-date CV to provide insight into your career history, skills, and qualifications.
  • An up-to-date contract that includes terms and conditions, your end client details, start and end dates, contract rate, and your status as the preferred supplier/contractor.
  • Three months of business bank statements (for limited company contractors) to show regular contract income.
  • Three months of personal bank statements to assess your financial management.
  • Three months of payslips (if working through an umbrella company) to understand any regular deductions.

Additional documents that may be needed include proof of visa status, proof of deposit, consent to let for investment properties, and records of previous contracts. It’s important to note that different lenders have different document requirements, and a specialist consultant can guide you through the process based on your unique situation.

Why Choose MyContractorBroker?

At MyContractorBroker, we specialise in finding the best mortgage solutions for contractors and freelancers. Our deep understanding of both contracting and mortgage underwriting allows us to provide tailored advice and solutions.

We have extensive industry experience and strong relationships with specialised Contractor Mortgage providers who assess your individual circumstances rather than trying to fit you into a conventional mold. Our director has played a pivotal role in shaping contractor lender criteria over the past 14 years.

So, what’s your next step?

We recommend engaging with a specialist as early as possible in your mortgage application process. Even if we can’t find an immediate solution, our team will work with you to take the right steps for your financial future.

#get in touch

Ready to get started ?

Speak to a MyContractorBroker specialist on 02394 211120

#get in touch

Ready to get started ?

Speak to a MyContractorBroker specialist on 02394 211122

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