The thought of securing a mortgage as a contractor without a regular paycheck might seem like an uphill struggle. But fear not. Whether you’re treading the path of homeownership for the first time, looking to move home or buy a rental property, we have the answers.
Based on the most common questions we field, this guide will help you achieve some clarity regarding contractor mortgages that we hope will help put your mind at ease. It’s not impossible to secure a mortgage as an independent professional; you just need the right people in your corner. From rates to paperwork, we’ve decoded the details so you can prepare to secure the mortgage you need.
Can I Rely on High Street Brokers?
Absolutely. You have options like banks and high street lenders. But, if you’re looking for a tailored approach that understands the contractor landscape inside out, it’s wiser to opt for a specialist broker. They have a treasure trove of mortgage products designed with your unique financial scenario in mind.
Do Contractors Face Higher Interest Rates?
No, the days of contractors being branded as ‘high-risk’ are gone. Mortgage rates for contractors are on par with those for traditional employees. Your employment status shouldn’t have to impact the rates you pay.
How Many Years’ Accounts Are Needed?
Good news – your contract rate alone can often secure you a mortgage. Even if you’ve just embarked on your contracting journey, there are options tailored to your situation.
What Documents Do I Need?
Essentials include proof of identity, address and income. If you’re going with your contract rate, your contract copy is crucial. If company accounts are your income proof, signed copies are the name of the game.
What’s an Agreement in Principle (AIP)?
Think of it as a preliminary nod from a lender. It’s not a guarantee, but it gives you the confidence to make an offer. AIPs usually remain valid for 60 to 90 days.
What’s a Mortgage Offer?
It’s the green light you’ve been waiting for. A formal confirmation from a lender that they’ll lend you a specified sum. Remember, it’s subject to certain conditions and generally valid for 3 to 6 months.
How Much Can I Borrow?
Your income, be it contract rate or accounts, dictates the range. Contractor experts estimate around 4.5 to 5 times your income. For example, a daily rate of £400 might let you borrow up to £432,000.
Do I Need a Large Deposit?
It’s not a must, but a larger deposit (10% and above) scores you better interest rates. However, options exist even with a 5% deposit.
What Stamp Duty Will I Pay?
Stamp Duty Land Tax (SDLT) is based on the property price. You can find out your SDLT using this calculator. There is an SDLT discount if you’re a first-time buyer and a premium to be paid if you already own a property. The tax is paid upon completion of the property purchase, so make sure you put aside funds to cover this additional cost.
What Other Costs Should I Expect?
Broker fees, application fees, stamp duty, solicitors’ fees, and surveyors’ costs form the typical expense types when you embark on a mortgage journey. It’s important to account for these when you start the mortgage process.
Want more information?
Broadbench advisers have the skills and knowledge to offer you bespoke and impartial advice, taking in a holistic understanding of your circumstances and combining that with a deep knowledge of what different providers offer. Not only that, but they know how to quickly navigate the insurance and mortgage minefield and set up exactly what you require – taking the hassle out of your hands.