Contractor Mortgage FAQs, Myths and Facts

Everyone has different opinions and different stories when it comes to trying to get a mortgage as a contractor. We’ve all heard some horror stories – but what’s fact and what’s fiction? Working with our market-leading friends at Contractor Mortgages Made Easy (CMME), we thought we would put together this helpful FAQ page - to help you understand it all a little better. . . 

Do I really need to have three years of accounts?
No, you don’t. For many years now, contractors have been able to arrange a mortgage that is based purely on their contract rate. Which means that you do not have to prove you have been working as a contractor for years, or provide year’s worth of accounts. CMME has negotiated specialist mortgage underwriting terms for contractors with a number of large High Street lenders, enabling them to arrange a mortgage based on the contract you have, rather than on the number of years you have been working as a contractor. The only evidence you will need to provide to support your application is a copy of your contract, some ID and your bank statements.

Some lenders tell me I need to have been contracting for at least six months, is this true?
An untrained call centre agent may well say this, as they are instructed to ask for proof that you have been in a role for a ‘substantial period’, something which is designed to minimise the lender’s risk. However, CMME simply avoid this stage altogether and instead work directly with key underwriters who understand that the contractor world is different and who will appreciate the value of your business to them. In effect, this means that you could arrange a mortgage as soon as you start contracting!

Does my ‘high risk’ category affect how much I can borrow?
Lenders who understand the contracting world will not see you as any more high risk than a full time employee. If your credit rating is fine and you have a deposit, then you’re classed as low risk and should be able to borrow around four times your contract rate. If you have CCJ’s against you, or have defaulted on mortgage payments or credit card bills for example, then it will be more of a challenge - but this would be exactly the same for an employed person as well. If you do find yourself in this situation, there are still a range of specialist mortgages available which are designed to suit your circumstances -  and CMME can help you find the right one, by helping you speak to the right people.

Will I need a huge deposit – I’ve heard as much as 50%?
Definitely not. The average deposit requirement at the moment is in the region of 10% to 25%. Since the credit crunch, many lenders have withdrawn the 90%, or even 100% mortgages that were being offered, but there are still very reasonable rates out there. It’s just a case of shopping around. And of course CMME can help there too!

Is it true that lenders quote higher interest rates for contractors?
Not at all. Interest rates are generally the same for Contractors as for permanent staff, and sometimes even lower. This is because, as a contractor, you may be in a position to have put savings aside and hence have a bigger deposit – which will reduce your interest rate and your monthly payments. As a contractor you may also have a better credit rating and this can help too.

I thought a self certification mortgage was the only answer – but cannot get one of those now either?
Mortgage brokers who do not understand the contracting world have typically used something called ‘Self Certification’ in order to arrange mortgages for contractors, although these are now far harder to come by after the credit crunch. In any case, Self Certification was also actually preventing some Contractors from benefiting from the best interest rates and the highest ‘loan to values’. Because CMME has already negotiated specialist underwriting terms for Contractors with major High Street lenders, they can help you to secure a mortgage based on your contract rate alone.

Is it really as complicated a reference process as I’ve heard?
It’s a common myth that it takes ages to get a mortgage approved when you’re a contractor, and that your accountant, bank manager, both grandparents and the cat will need to provide references! But because the key underwriters that CMME works with really understand the nature of your income, a mortgage can be secured based purely on your contract rate. This saves you the time, hassle and cost of collecting references, and significantly speeds up the process.

If I tell my mortgage provider I’m Contracting, will they charge me a higher rate?
There are many reasons why a lender might change a rate – for example at the end of a fixed term, or when the base rate changes if you’re on a variable mortgage – but ‘because you’re contracting’ isn’t one of them! If your existing rate ends and you are not moving house or releasing any capital from your property then your new Contractor status should make no difference.

If you are looking to take that first step on the ladder, or to remortgage an existing property, then Contractor Mortgages Made Easy will help you find a solution to suit your needs. Whether you want to find out the best rates available or help calculating how much you can borrow based on your contract rate alone, call 01489 555080 or email CMME on sjd@contractormortgagesuk.com.

You may also find our other contractor mortgage guides and calculators helpful:

If you are looking to take that first step on the ladder, or to remortgage an existing property, then Contractor Mortgages Made Easy will help you find a solution to suit your needs. Whether you want to find out the best rates available or help calculating how much you can borrow based on your contract rate alone, call 01489 555080, email CMME on sjd@contractormortgagesuk.com or fill out the below form:

Contractor Mortgages Made Easy is a trading name of Mortgages Made Easy Limited. Authorised and regulated by the Financial Conduct Authority (FCA reg. 414798).Registered in England No. 4886692 Registered Office: 9 London Road, Southampton SO15 2AE.Your home may be repossessed if you do not keep up repayments on your mortgage.

SJD Accountancy

SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers - unlimited face to face meetings across the UK - tax is complicated and sometimes only a meeting will do.
  • UK's Largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant face to face.
  • Money back service guarantee. All your telephone calls and emails will be answered the same day or we will make a full refund of that months fee.
  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Accountant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee starting from £120 plus VAT per month. Check our packages for more detail.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 01442 275789 or email: janice@sjdaccountancy.com. Our new client services helpdesk is open Monday to Friday (8am to 6pm).

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again.

Form your own Limited company with SJD - our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure. 

You may also find the following pages, guides and case studies useful:

*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.