Are you a contractor looking to secure a mortgage? Feeling a little lost in the maze of which lenders are truly contractor-friendly? Embarking on the search for an appropriate mortgage deal as a contractor can very quickly become a miserable task.
Fear not, My Contractor Broker is here to help. Our consultants have over 15 years of experience dealing with contractor mortgages and have been involved in numerous conversations with lenders looking to improve their offering to the contractor community.
Lenders now acknowledge the affordability and earning potential of contracting professionals, and as a result, are offering tailored mortgage solutions that cater to the needs of the flexible workforce.
Traditional lenders may encounter difficulties in accurately assessing your income due to the non-standard nature of contracting work. Limited company contractors are often labelled self-employed and subject to standard criteria meaning income is assessed on company accounts, whilst umbrella contractors struggle with how income is broken down on payslips.
Today we will cover a selection of lenders that have dedicated contractor underwriting
Halifax Contractor Mortgages
Halifax, the largest mortgage lender in the UK, is renowned for its efficiency in processing mortgage applications and swiftly providing contractor mortgage offers.
Part of Lloyds Banking Group, Halifax was the pioneer in developing tailored underwriting solutions for contract workers in the early 2000s.
Their lending policy can be summarised as follows:
- For both umbrella and limited company contractors, income is calculated based on a 46-week period.
- Limited company contractors must provide the current contract details and the most recent business bank statement reflecting contract income.
- Umbrella contractors are required to submit their current contract information and the latest payslip from the umbrella company.
- Any deductions made by the umbrella company will be subtracted from the income before applying the 46-week multiplier.
- Non-IT contractors must meet Halifax’s minimum annual income requirement of £75,000.
Skipton Contractor Mortgages
Skipton has emerged as one of the leading mortgage lenders in recent years, primarily due to their innovative and adaptable lending policies.
They have established themselves as contractor-friendly, offering a unique method of evaluating income for contract workers that surpasses that of Halifax.
Their income assessment is based on a 48-week period, making them more generous than Halifax for both limited company and umbrella contractors, without any deductions from umbrella company payslips.
To qualify, applicants must provide:
- Evidence of a 6-month contract history
- Curriculum vitae (CV) confirming a minimum of two years’ experience in the profession.
- The most recent personal or business bank statement will serve as verification of the contract income being received.
For the most flexible criteria, the income threshold is set at £50,000 per year, surpassing Halifax’s requirement of £75,000. Skipton even accommodates individuals earning less than £50,000, without any restrictions based on profession.
Accord Contractor Mortgages
Accord is the broker-only division of the Yorkshire Building Society. To qualify for their contractor offering, contractors must be able to provide:
- A minimum contract rate of £300 per day (or its hourly equivalent)
- 6 months of contracting history although they may consider individuals who are new to contracting (without 6 months of history) based on their unique circumstances
- Contractors operating under limited companies, sole traders, and umbrella companies are all eligible
- Gaps between contracts of up to 8 weeks are acceptable, and longer gaps may be considered based on the overall risk to the lender.
Accord is a particularly contractor-friendly lender due to its willingness to consider cases outside of policy if it presents a good business case.
Multiple lenders now offer tailored options to contractors covering various situations from inside IR35 to outside IR35 roles, day-one contractors, short-term contracts and gaps between contracts. A My Contractor Broker consultant will be able to work with you to explore the various options and find a lender that caters to your requirements.
Contact the team today on 02394 211122.