16 Apr 2019
MO’s Top Tips for Securing A Contractor Mortgage
Choosing to work as a contractor can offer you a great deal of flexibility and freedom. But, when it comes to buying a property, it can also mean a great deal of uncertainty. However, as the number of contractors and freelancers continues to grow in the United Kingdom, many more mortgage providers could be willing to offer you a mortgage deal, even if your income fluctuates as an independent professional.
When you apply for a mortgage product, the provider will first determine how much money they are prepared to lend you, which is known as an affordability assessment. This assessment basically looks at how much you generally earn, what your expenses are and how secure your income is. As a contractor, you will typically need to show evidence of your income history for at least 6 months. However, some mortgage providers will ask to see up to 3 years’ worth of accounts.
So, if you are contractor or freelancer and thinking about buying a property, then continue reading this blog post as we are going to share our top tips for securing a contractor mortgage.
Avoid Lengthy Gaps Between Your Work Contracts
This might not come as a surprise that mortgage providers do not like risk. If your accounts are not consistent over a significant amount of time, then this may count against you when making a mortgage application. And, if you have gaps between contracts that last over 6 weeks, then they may also regard you as a risky borrower. With this being said, if you earned more money in the last financial year than you did the previous, then the chosen lender will either use your most recent account and current contract to determine how much they are willing to lend you, or an average of the last two years.
Do Some Basic Research Before You Start The Mortgage Application Process
It is a very good idea to do some basic research to understand the fundamentals of mortgage borrowing before you approach a mortgage lender or online mortgage broker. You will find that there are a whole range of different products available such as tracker and offset mortgages. You should also research the difference variable and fixed rate mortgages together with learning the common mortgage related jargon. Before you start the mortgage application process, make sure you are comfortable and have a good understanding of what the process entails. If there is anything that you are unsure of, then get in touch with a team of financial advisers or a mortgage specialists who will be more than happy to provide you with mortgage advice. Additionally, if you have any general questions that relate to mortgages, then why not visit our mortgage FAQ page.
Have Your Personal Documents Ready
It doesn't matter whether you use your current job's contract as proof of income or your past accounts, you will need to provide your chosen mortgage provider with the necessary paperwork. Whenever you apply for a mortgage, you will need to provide proof of your address which could include your driving license, passport or bills and some recent bank statements.
Use a Lender That Has Experience With Securing Contractor Mortgages
There are many different ways that you can choose a mortgage advisor or online mortgage broker just like MO. However, we highly recommend that you use a mortgage provider that has experience with securing contractor mortgages. They will have access to a range of different mortgage products that are designed specifically for contractors and freelancers.
Keep a Close Eye on Your Credit Score
Your credit score has a huge influence over whether you will secure a mortgage deal or not, and who with. Even if you have significant income and enough money saved for the mortgage deposit, your mortgage application could be rejected if you have a poor credit score. Some mortgage providers are becoming far stricter when it comes to credit scores, so it is essential to keep yours as good as you possibly can to maximise your chances of securing a mortgage deal. However, should you find yourself with a poor credit score, dependent on the circumstances, there are specialist lenders who will still consider your application.
Read the Small Print and Be Aware of Hidden Insurance Clauses
If you are a contractor or freelancer, then you need to be wary of mortgage lenders that include insurance clauses as part of their services. Some lenders will insist that taking out a mortgage with them requires certain types of insurance. Some of these additional amenities are unnecessary and more often than not an attempt to get the borrower to pay more money with them.
