How Can Contractors Get a Mortgage?

The last few years of this era have been seen to get more and more difficult for people to get a mortgage. In this regard, contractors face the most complications when they apply for a mortgage. The credit crunch faced by the world in 2007 was the beginning of the hype created in the market of economy.

Today, people have to make everything perfect in order to get the best mortgage for themselves. However, mortgages for contractors basically depend on the type of contractor-ship one holds. Moving on, lets us talk about some of the types of mortgages, depending on the type of contractors and some additional information you might need.

v Self-Employed and Sub Contractors:

Self-employed contractors are basically people who are self-employed and are registered with HMRC. These self-employed people pay their own tax, the National Insurance contributions. These people either declare their income through an accountant or self-assessment. These self-employed contractors may be sub-contracting for a single company, or a list of companies.

To be eligible for such a contractor mortgage, you need to have an at least 12 months prior work experience. The lenders will then assess you on the figures you have declared as your net profit or the dividend plus your salary.

v Recently Self-Employed Contractors:

There is another category of self-employed contractors which people are not familiar with. If you have recently changed your employment status and you have gone from being an employed worker to being a self-employed contractor, you might be eligible for a contractor mortgage without having a prior wok experience of 12 months.

However, this criteria mainly depends on the lenders. The lenders can either consider this factor or decide not to consider it at all. Although, if they do decide to consider it, you will have to go through a strict criteria ahead. It relies on the day rate calculations and some certain details present in your contract, when you begin.

v Fixed or Short-Term Contractors:

Although, fixed and short term contractors find it the most difficult to work out a standard mortgage or convince the lenders enough to trust in these contractors, they find it easier than most of the contractors to get hold of finance.

The lenders mostly set a criteria in which the clients must have a 6 months prior work as a contractor, and 6 months of work left as a contractor. Your contract history matters a lot. On top of that, if you have renewed your contract more than once, it proves to be a steady income and increases your chances of getting approved.

Other Considerations:

Mortgages and Age:

Some lenders only offer a mortgage to fixed or short-term contractors, if they are above 25 years of age.

Mortgages with Adverse Credit:

As lenders are already subjects of huge risk when dealing with contractors, they  might not accept an application with adverse credit.

Repayment:

For fixed or short-term contractors, lenders usually insist on a ‘repayment only’ mortgage and none other.

These types of contractors mainly define the type of mortgage being offered to a contractor. Hence, a contractor needs to make sure which type he falls in, in order to get the best mortgage possible.

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