Did you know that 34% of those who make financial decisions, without seeking advice, will regret those choices? This is according to data collected on an Unbiased survey.
Making a wrong decision can be costly and very stressful. Savvy contractors take financial advice before making every financial decision.
But, where to get the advice? This article explores why using a specialist contractor broker for your mortgage and insurance requirements is worthwhile considering and could save you time, money and hassle.
High Street vs Contractor Mortgages
Firstly, let’s look at mortgages, your income is not PAYE and therefore deemed to be non-standard by lenders. Over-the-counter Highstreet lenders can struggle to assess the risk of lending to a contractor or freelancer because earnings are variable and can be paid via an umbrella, a limited company or directly.
Plus, contracts are often short-term meaning that lenders can perceive contractors as higher risk than their PAYE counterparts. Many lenders will disregard a solid work history of repeat contracts and focus on the contract length alone. This can mean contractors being quoted increased premiums or even an application being declined.
Most lenders use a standard affordability calculation that doesn’t take into consideration if you draw only a little salary and choose to top-up with dividends.
Jump-start your mortgage
Specialist freelancer brokers leapfrog the bank counter and talk directly to specialist underwriting teams that understand contracting. These specialist underwriting teams are not accessible to applicants directly, because they expect the broker to have correctly vetted the contractor in advance of submitting any application. An expert broker assesses your full work history and can interpret your contracting income, thereby understanding that you’re likely to be a lower risk.
Generic brokers don’t have these relationships in place, nor do Highstreet lenders, and often fail to even identify you as a specialist borrower in the first place.
Understanding day rates
Contractor brokers understand your earnings, like day rate and dividends, and know how to look at your yearly income. Often it reveals that you earn more than your PAYE counterparts. Moreover, they understand your industry sector and when necessary, can explain your situation to a specialist underwriter to help them make sense of your true mortgage affordability.
Protect your credit score
By using a specialist contractor broker, you minimise the risk of having your mortgage application rejected. The impact of being rejected for a mortgage is that it will show on your credit history, and may detrimentally impact your ability to get any credit let alone a mortgage.
Why a self-employed mortgage differs from a contractor mortgage
You may have already spoken to your Highstreet lender and been offered a mortgage tailored for limited company contractors. This is likely to be an off-the-shelf self-employed mortgage, which is not ideally suited to contractors using a limited company.
A self-employed mortgage uses your SA302 to evidence your income. However, if you are drawing only a minimal salary and using dividends as your top-up, then for a generic lender or adviser you’ve excluded the majority of your income from consideration.
Aftercare
A good contractor broker will have aftercare built into their process and they’ll notify you in plenty of time before your initial reduced rate runs out, and well before you fall onto the lender’s Standard Variable Rate (SVR). They are also there to support and guide you should your circumstances change at any time.
Why use a specialist broker for your business insurance needs?
Critical Illness, Income Protection, Key Person, Professional Indemnity, Relevant Life Insurance… Let’s face it, there is a dizzying array of different products and solutions in the insurance space. It is difficult to adequately assess which product at what level of cover will best suit your needs. This is where talking to an expert contractor adviser really comes into its own.
A whole-of-market adviser is impartial and has the skills and knowledge to fully assess all of your circumstances before providing a recommendation. A specialist contractor adviser will take a holistic view of mitigating risk and succession planning and highlight tax efficiencies, and product sectors that you were perhaps unaware of.
Not only that, but they know how to quickly navigate the insurance minefield and set up exactly what you require – taking the hassle out of your hands.
No fee advice
Unlike mortgage advice, where there is usually a flat fee paid to the broker, you pay no fees to an insurance adviser. If you choose to take an insurance product, then the provider will pay fees to the adviser. If you do not take out a policy, then the adviser doesn’t get paid.
Price is merely the tip of the iceberg
When we think of everyday personal insurance for our car, home and pets, price is usually at the forefront of our mind. But when considering more complex insurance to protect ourselves and our business against prolonged illness or death the level of cover is arguably more important.
Don’t leave it until you claim to realise that you had insufficient protection in place. A recent FCA Thematic Review stated that up to 40% of small businesses could be underinsured. Most of us use an accountant to file our taxes, so why would you not use a specialist for such a complex business essential as insurance?
Specialist insurance isn’t purely about the premium, it’s about the value of the policy should you need to claim. There is little point in insurance where the payout does not meet your needs. By paying a regular, proportionally small, sum you are safeguarding against future loss.
Professional, regulated advice
Insurance professionals are highly qualified and the industry is one the most regulated in the UK.
The devil is in the detail
A failure to disclose all pertinent information to the insurer, or a missed condition, can mean that your insurance policy is not fit for purpose, or worse, null and void. A generic broker may not fully grasp aspects of contractor risk, the way you work and earn, or your industry sector which can result in a failure to provide you and/or the insurer with essential information. A specialist broker knows the right questions to ask, will fully explore the nuances of the policy with you, and provide the insurer with as much about your business as possible so that there is absolutely no chance of misrepresentation. Using a specialist broker will give you peace of mind that should you ever need to claim your policy will deliver everything that you expect.
Aftercare
A good contractor adviser will have aftercare built into their process and can guide you to the right policies, at the right level of cover, for a price that’s affordable and suited to your needs. They are also there to support and guide you should your circumstances change at any time.
In summary
Both for your mortgage and insurance needs using a specialist broker will give you peace of mind that the policy, price, and conditions are right for you and your business. Always check the firm’s review scores, after all the customer is king, and how long they’ve specialised in the contractor, freelancer and limited company space.
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.
