As a contractor on a fixed-term contract, you may find it challenging to get a competitive mortgage from high-street lenders due to the perceived higher risk. But hope is not lost! Fortunately, the team of experts at Heritage have access to a much wider range of lenders and can find you the ideal contractor mortgage.
Welcome to Heritage Financial Planning, specialist contractor mortgage brokers
As an employed or self-employed contractor, you enjoy a great deal of flexibility in your career, but no doubt your income fluctuates from time to time. This can prove challenging when it comes to getting a mortgage, especially as a first-time buyer.
Most lenders are risk-averse and favour permanent employees over contractor applicants – but that doesn’t mean you’ve no hope of getting on the property ladder.
At Heritage Financial Planning, we can guide you through the complex world of contractor mortgages and approach a range of contractor-friendly lenders to improve your chance of success.
The team is here to support you every step of the way, from mortgage application to completion and present you with the most competitive contractor mortgages available to you
Contact us today to organise a free initial consultation to discuss your contractor mortgage needs.
What is the eligibility criteria for contractor mortgages?
Eligibility varies depending on the lender and the borrower’s personal circumstances. However, here are some common factors:
Contract length and history – Most lenders specify a minimum contracting history, typically one to two years. Specialist lenders will usually consider the number and length of your previous contracts during this period along with your current contract.
- Self-employed contractors – typically eligible for a mortgage with a contract length of at least 6 months (including both sole traders and limited company contractors).
- Umbrella company employees – 12 months of working history
- Agency workers – 12 months of working history
- Employed short-term or fixed-term contractors – typically need prior experience in the industry
- Zero-hour contractors – a minimum of 6 months of working history.
Income verification – Lenders will require evidence of your annualised contract rate, contract earnings, invoices, bank statements, and/or tax returns to evaluate the reliability and predictability of your income.
Credit history – A good credit score improves the chances of approval.
Deposit size – Generally, the larger deposit the better the chances of approval.
Affordability criteria – Most mortgage lenders assess affordability for a mortgage based on income stability, which doesn’t always work in a contractor’s favour. For example, many contractors draw a low salary and supplement their income with dividend drawings, as a legitimate way to avoid higher rate personal tax.
The good news is that contractor-friendly lenders work on a contract-based underwriting basis, i.e. they will assess your eligibility based on your annualised contract rate.
Who can qualify for a specialist contractor mortgage?
This varies, but there are a few common factors:
|How long you have been in the profession||Typically, the longer the better.|
|When your contract started||Usually at least 3-6 months into a contract.|
|The remaining length of your contract||3 months remaining but some lenders accept 1 month remaining|
|Minimum Income||The more you earn the greater your chance of getting a contractor mortgage.|
Generally speaking, if:
- you have been contracting for 2 years or more,
- your contract started 3-6 months ago, and
- you still have some months remaining on your current contract (or have another contract lined up),
Then the greater your chance of being accepted. This said, if you do not quite fit this criteria, there may still be options, which a broker can help you to access.
Our process of helping contractors find a mortgage
At Heritage Financial Planning, we’re here to streamline the process of securing a contractor mortgage and will support you throughout the entire process.
1. Free initial consultation: We begin with a detailed consultation to gather your personal details. We will assess your contract earnings, employment history, and financial stability to help us target mortgages and lenders that align with your personal circumstances.
2. Market research: Our experienced team will scour the mortgage market to identify mortgage lenders who specialise in contractors. We go beyond high street lenders to include those with more flexible lending criteria and a deep understanding of contractor income structures.
3. Mortgage options presentation: We will then present you with the best mortgage deals available. We will provide a clear comparison between the available mortgages, including the interest rate, mortgage term, fees, and any contractor-specific features.
4. Mortgage application: Once you’ve made your decision, we will manage the mortgage application process. We will gather all of the necessary documentation, prepare the application, and submit it on your behalf.
5. Ongoing assistance: Throughout the process, we provide ongoing support and mortgage advice, addressing any queries or concerns that may arise during the underwriting and approval stages and beyond.
What fees do you charge?
As contractor mortgages involve a degree of complexity, we normally charge a fixed fee of £495. This can increase depending on the nature of your case, but you can be assured that we are completely transparent with our pricing upfront.
Why choose Heritage as your specialist contractor mortgage broker?
Heritage Financial Planning is a team of independent professionals with a great deal of experience in arranging mortgages for contractors. We have access to a wide range of mortgage providers that understand the complexities of contractor income and are more flexible in their lending criteria than traditional high-street lenders.
We offer a high level of customer service, and your dedicated contractor mortgage broker will take the time to understand your personal and financial circumstances, as well as your long-term goals. Armed with this information, we’ll search the market to find the most competitive mortgage deal available to you.
Along with mortgage advice, we’ll support you throughout the entire application process by gathering documentation, negotiating with mortgage providers and making your application.
Our aim is to make things easy as possible for you to find a mortgage, whether you have your own limited company, are a sole trader, or operating under an umbrella company.
Contact us today to arrange a free initial consultation.
Frequently asked questions about contractor mortgages
As a contractor, am I more likely to get a mortgage with a partner?
Assuming the second applicant is employed, then this will likely help your application, as it will increase your affordability and the maximum amount you can borrow.
Can I get a contractor mortgage with bad credit?
Having a poor credit history may limit the number of mortgage lenders available, but options still exist. It depends on the type and duration of the adverse credit, as well as your recent contract history. Working with a contractor mortgage broker is especially important in this scenario.
Can I get a buy-to-let mortgage as a contractor?
In the case of buy-to-let mortgages, loan providers generally focus on the potential profitability of the investment, expected rental income, and other factors rather than the borrower’s contract rate or income.
Am I restricted in finding a mortgage lender as a contractor?
In the past, mortgage options for contractors were limited when compared to those available for employed workers.
While it’s true that high street banks have stricter lending criteria and there are fewer mortgage providers who offer contractor mortgages, the market has evolved, and there are more options available than ever.
These lenders sometimes work on a contract-based underwriting basis, i.e. they will assess the borrower’s eligibility on their contractual income rather than traditional employment income.
Is a fixed or variable rate mortgage best for a contractor?
Both types of loan contract rates have their pros and cons. Variable-rate mortgages offer the flexibility to make overpayments, which may suit you as a contractor if your income fluctuates.
However, the initial interest rates are generally higher than a fixed-rate mortgage loan, and your repayments will be affected by increases, so they are more unpredictable.