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When it comes to finding mortgages for contractors, we’re always on hand to help with the additional challenges you might face. Even if you’re just exploring options, our expert advice is always free.
As an independent contractor, finding a mortgage can be a difficult process, but at Derbyshire Mortgage Services we are here to help you navigate the contractor mortgages market. Whether you have a fixed day rate, are on a short-term contract, are an independent contractor operating under an ‘umbrella company’, or are a Construction Industry Scheme (CIS) contractor, we can walk you through the process and requirements no matter the situation. We would recommend getting in touch as soon as possible to discuss the process further, as no contractor mortgage or client is ever quite the same.
The key part of contractor mortgages, and our job as your contractor mortgage broker, is to prove that your income is sustainable. While past contracts and employment history are obviously important, there should be equal focus on current and any future contracts and agreements. By demonstrating your services are required by employers, and that your income will continue to reach the required repayment targets for the amount you would like to borrow, we will be able to help you find the best available contractor mortgage for your situation. While it may be more challenging, we firmly believe that being a contractor should never be a barrier to moving onto or up the property ladder.
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Contractor mortgages can be confusing, so why not contact us for some more in-depth and specific advice for your situation. Our friendly advisors are always happy to speak to you for free.
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Self-Employed Mortgages
Looking for more general information about getting a mortgage while self-employed? You may find the information you need here.
More about self-employed mortgages
Stamp Duty Calculator
Don’t forget about stamp duty! When looking for a contractor mortgage, it’s important to make sure you’ve taken everything into consideration – our stamp duty calculator can help you work out what you will owe.
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Key Facts
1. What is a Contractor Mortgage?
A contractor mortgage is a product designed to allow people working as contractors to borrow money based purely on their contract rate. This could apply to a CIS contractor, consultants, accountants, architects, doctors, teachers or any number of other professions who operate under day-rates or short term contracts.
2. Assessing Your Income
The amount that can be borrowed on a contractor mortgage will depend on the annual income based on your current contract. This can roughly be done with the following calculation - current contract day rate x number of days worked in a week x 46 weeks of the year x 4.5 – but we can help you calculate a more accurate figure if you get in touch. Our advice is always free!
3. Credit
If you have bad credit when looking for a contractor mortgage, you may find it much harder than usual. While still achievable, improving your credit score will really help. You can do this in a number of ways, including getting onto the electoral roll, avoiding pay-day loans, minimising your debt, and ensuring that any repayments for credit cards, bills or loans are paid on-time.
4. How to Strengthen Your Application
Besides improving your credit score, when applying for a contractor mortgage, the more evidence you can provide for sustainable income the better! Two or more years of payment history as a contractor is ideal, but equally if you can prove your services are required by employers and you have strong current and future contracts and agreements, we will certainly be able to help.
Contractor Mortgages Help!
Still don’t quite have the information you need about contractor mortgages? Your answer might be here, but otherwise please don’t hesitate to get in touch with further questions.
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1.
Is it harder to get a mortgage as a contractor?
The application process for a contractor mortgage has some additional challenges, but it’s certainly not an impossible thing! Lenders will assess your income differently to someone employed with permanent full-time employment – why not call us for free to talk about your personal situation further?
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2.
What types of contractor mortgages are available?
Contractor mortgages are available to you if you’re a CIS contractor, agency worker, self-employed, working under an ‘umbrella company’ or working under a fixed-term contract. Please do get in touch to discuss your situation with us – our friendly advisors are always on hand to offer advice, and the advice is always free!
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3.
What is a CIS mortgage?
There isn’t a specific CIS mortgage product, but the Construction Industry Scheme (CIS) allows those eligible to present their income to mortgage lenders as a pre-tax gross income, rather than post-tax profit. It therefore allows those who are part of the scheme to borrow a greater amount than those who are not but have comparable income.
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4.
How are contractor mortgages different?
Contractor mortgages are products designed to meet the specific needs of contractors given certain technicalities that exist around their pay. They will allow you to borrow money based purely on your contract rate and conduct an affordability assessment that gives more weight to current and future contracts than to those in the past. Depending on your situation, or if you’re a CIS contractor, there may be further differences in the contractor mortgages available – please call one of our advisors for more specific details.
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5.
Will my contractor mortgage have a higher rate?
Providing you have a good credit report and are considered low-risk by the lender, you should be able to borrow for a contractor mortgage at the same rate as someone with permanent employment.
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6.
How do I improve my chances of acceptance for a contractor mortgage?
The two key ways to improve your chance of receiving a contractor mortgage are to have the best credit report you are able to produce, and to have clear evidence that your employment is sustainable. You can prove your sustainability through past work, but current and future employment is especially important. A larger deposit will also be an advantage in getting the best rates.
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7.
What information do I need to provide for a contractor mortgage?
The documents you will be required to present will be dependent on your personal situation. You will need all of the usual documentation for a mortgage application – such as proof of address and financial statements – but we would recommend calling us to discuss other required documentation further as it can vary from situation to situation.
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8.
How much can I afford?
As well as contractors varying from one to another, different lenders may also use different methods to calculate your affordability. As a basic rule of thumb, however, you can use the following calculation:
Current contract day rate x number of days worked in a week x 46 weeks of the year x 4.5
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9.
I’ve only just become a contractor – can I still get a mortgage?
While it’s certainly easier to get a contractor mortgage with evidence of long-term sustainability, some lenders will be happy to see as little as six months of regular employment to prove you’re established. Demonstrating employers need your services and you can command certain income over a future period of time will also help hugely.
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10.
My contract is only short term – is this a problem for a contractor mortgage?
Most likely no! It will very much depend on the nature of your contract and how easy it may be for you to line up future employment. Lenders are interested in sustainability, so if you’d like to discuss your personal situation further please do get in touch for fee-free advice.
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11.
How important is my credit score?
As a contractor, bad credit will mean you may find it more difficult than usual to get a mortgage. It is still possible, but we highly recommend you try to improve your credit score prior to application. This can be done by joining the electoral roll, avoiding pay-day loan schemes and ensuring all debt repayments are cleared on time.
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12.
Can I get a first-time buyer or buy-to-let mortgage if I’m a contractor?
As with a normal contractor mortgage, there will be certain hoops to jump through in the application process, but these options should still be open to you. For both types of mortgage, you will need to prove your income is sustainable and suitable for the amount you want to borrow, and Buy-to-Let mortgages will also be dependent on the potential rental income of the property.
Please do get in touch to discuss your specific situation further and how we may be able to help you find the best deal. It’s always free!