Experts in finding the right mortgages for Contractors.
Experts in finding the right mortgages for Contractors.
Although contracting is incredibly common these days, we still get a huge amount of enquiries from clients that have been finding it difficult to find a bank or building society that understands their income and can offer them a mortgage.
There are many different types of contracts and therefore many different ways lenders will assess the income. The one thing every lender has in common with their criteria though is experience. Every lender will want you to either have a history of contracting, history in the industry or time remaining on the current contract.
The easiest thing to do would be to break it down into different types. The list below certainly isn’t an exhaustive list but will hopefully provide some insight to help you move forward.
Freelance
The key to getting a mortgage as a Freelancer depends on how you operate. Some will operate as a contractor, some in a partnership and others will run it through a Ltd Company.
Depending on the way you take the income will change the requirements from the lender. For example, if you are contracting through a Limited Company you will need to show at least 2 years’ worth of Accounts. They will then look at the income and either work from an average of both years or potentially look at the most recent only, regardless of whether it’s higher or lower.
They don’t like to make it easy for you but that’s what we’re here for!
Day rate
A lot of Contractors are paid a Day Rate for a certain period, this is very common with IT Contractors for example. We see a lot of enquiries where someone may be on a 6-month contract and receive a certain amount 4 days a week with a higher day rate for any additional days needed that week. Typically lenders will look at this income in the following way:
(Day rate x 4) x 48.
The reason they multiply for 48 is that they take into account holidays throughout the year when the contractor won’t be working. The way they calculate the additional days on top would depend on history and how regular they are! They don’t like to make it easy.
If you then run your income through a Ltd Company the goalposts change again and they will potentially need 2 years of history before considering!
Honestly, it would be easier to give us a call to discuss as every person’s situation is slightly different.
Fixed Term Contracts
This is all about history. It will vary from lender to lender as to how much they need typically if you have continuous employment from contracting for 12 months or more than 6 months left on your current contract, we can help.
Some lenders don’t even need a history of contracting, just a history of working in that industry even if it was on an employed basis.
Zero Hour Contract
This is quite restrictive unfortunately with many lenders just refusing to accept an income from someone that is on a zero hours contract. Those that do take this into account will need to see at least 12 months of history working this way.
Sports Person
Most sports Professionals tend to have short-term contracts. This in itself isn’t too tricky to place but the tricky areas to be aware of are the maximum age lenders will allow and how they will view any of the additional bonuses received for performance.
Mortgages for Footballers are a good example of this and something we have a great deal of experience with. Most lenders will look at a maximum age of 33-35 for the end of a player’s career, therefore they will only allow a term that takes the player up to this age. There is a chance we can look beyond this should the footballer have a solid plan, with evidence, for what they will do after their playing career but in most cases, the term is capped to the age of 35. Football players sometimes also receive bonuses for playing or scoring or where the team ends in the table at the end of the season. The way lenders view this will depend on the history of receiving it. If you have received a regular bonus’ for the last 12 months or more, it is likely we can use this to help.
The other area to consider for professional sports players, Tennis players, for example, is sponsorship and prize money. Again, this is something we have a great deal of experience with so would recommend giving us a call but to give some indication, it’s all about the history of receiving it and the length of the contracts.
In summary, we can’t emphasise enough how important it would be to have a chat with us first so we can listen to your situation and point you in the right direction. You can see from all of the above there are many many ways lenders will assess your income so make sure you’re going to the right lender and getting the best deal can be difficult, but not for us. We do it every day.
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- How much you can borrow
- What that will cost
- What fees can you expect?
- How Adam Wells Mortgages work
- What insurances you will need
- What documentation you will need to provide
- Next steps
Adam Wells Mortgages is a trading name of Adam Wells who is an Appointed Representative of PRIMIS Mortgage Network, a trading name of First Complete Ltd. First Complete Ltd is authorised and regulated by the Financial Conduct Authority.
A fee of up to £495 per mortgage may be charged depending on individual circumstances.
The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK.