Contractors
Mortgages for Contractors.
If you’re a contractor or a freelancer, it can feel complicated when it comes to acquiring a mortgage, but we can help you. If you’re looking for a free mortgage advisor for contractors, then you’ll be happy to know that TW Mortgages offer free mortgage advice no matter what your financial circumstances.
When you’re self-employed, it can be tricky in getting a mortgage approved when there’s inconsistencies to your income and gaps between contracts. But don’t despair - there are certain steps you can take to improve your chances of getting a mortgage approved by a lender.
How a contractor's income is assessed for a mortgage.
When you’re thinking of buying a house, we strongly recommend you speak with a free mortgage advisor for contractors. The mortgage advisor can tell you your affordability (what you can afford to borrow), find you a lender suitable for your situation, and assist you throughout the application process.
When a mortgage broker calculates your affordability, they’ll look at how much you earn, your expenses and how secure your income is. If you’re a contractor, you will need to show evidence of your earnings history for the past 6 months (at least), and evidence that your contract is likely to be renewed going forward, although some lenders may wish to see the last 2 or 3 years of your accounts.
If you’ve been working as a contractor for a very long time, the lender will average out your income over the recent years to calculate your average income. However, this can be tricky for contractors who have incomes that change drastically year to year. If this is the case, they’re likely to take the most recent year (or the lowest) as an indication of your earning capacity.
How to strengthen your mortgage application as a contractor:
Increase the size of your deposit: A way to get the lender looking favourable at your application is by saving a larger deposit so you can borrow less funds from a lender. They’ll view you as less of a risk.
Evidence of long-term security: They will also want to see evidence of long-term security. This could be in the form of current and previous contracts. Provide bank statements, invoices and anything else to demonstrate your accounts. If you’re a limited company, provide your full business accounts and balance books. It may also be worth providing any qualifications and previous experience as well.
Keep employment continuous: Ensure you keep employment as continuous as you can - reduce your breaks as lenders may get uncomfortable seeing anything longer than an 8-week break in your income.
Know your credit rating: If your credit rating is floundering, then take the time to improve it before applying for a mortgage. Lenders will look closely at credit ratings as a contractor with a good credit rating clearly demonstrates great financial management despite income not guaranteed. If your application gets rejected, do not worry as you may have more luck with a specialist lender - we can help you with this! But please note that a declined application will be recorded on your credit history and may make it harder for you to be accepted in the future.
Consider a joint mortgage: Lenders may look at your application more favourably if you buy with a partner who is in full-time employment because they’ll want to still see a constant earnings pattern.
Consider a guarantor mortgage: If your income varies to a high degree, you may need to explore a guarantor mortgage as an option/ this is when a parent or family members provides a guarantee on your mortgage against their own home.