Mortgage Tips for Contractors
Here are five suggestions from us that can make a real difference to the success of your mortgage application:
1. Use a Contractor mortgage specialist
It’s very easy to assume that you can get out there and find the right mortgage deal single handed. The problem is that most bank staff or call centre agents are not familiar with the contracting world. This means that you tend to fall outside of their ‘standard script’ when it comes to asking for things like employer’s details, proof of time employed and so on.
Our recommendation therefore is to find a mortgage broker that specialises in working with contractors. This is why we have developed a relationship with our chosen broker, Contractor Mortgages Made Easy (CMME). This approach will save you hours of making calls or wandering around the high street trying to find a lender that doesn’t shudder at the word ‘Contractor’.
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. This enables you to arrange a mortgage based on a multiple of your contract rate alone, so you don’t have to provide three years accounts or collect references. The only evidence you will need to provide to support your application is a copy of your contract, some ID and your bank statements.
By avoiding branch or call centre staff who are not trained to deal with your specific situation - and instead speaking to key mortgage underwriters that understand your status, through CMME – you can make sure that your mortgage application is fast and hassle free.
2) Aim for at least a 10% deposit
The 100% mortgage is sadly just a distant memory, and the best rates now available go to those people who have managed to save a deposit. 10% to 25% is ideal. If you have not managed to do this, or if you don’t have an existing property which is worth more than you paid for it, then there are still mortgages out there - but you will pay a higher rate. The more ‘equity’ that you can put into a new property in as a deposit the less risk the lender is taking on, and so they are able to offer lower rates, and hence lower repayments.
3) Keep your credit rating as shiny as possible!
Despite a good income and a sizeable deposit, you could still have a mortgage application refused if your credit rating is not good. Lenders are being far stricter at the moment, given the economic climate, so it’s best to avoid anything which may give them an excuse to say no. Which means it’s vital to keep your credit rating as ‘clean’ as possible. Even things like not updating the electoral roll when you move house, or missing a single credit card payment, can make all the difference.
4) Make sure your contract is up to date
You will need to have a copy of your signed contract to hand which is totally up to date. This must clearly state the length of your contract, and your current contract rate. Contractor Mortgages Made Easy use this information to support your mortgage application, and to save you the stress of having to produce references and three years of accounts.
5) Know your limits
It’s vital that you are realistic about what mortgage repayment you can afford to pay each month. The figure that a lender is willing to offer you, based on a multiple of your contract rate, could result in higher repayment figures than you can actually afford, based on other financial commitments you have. So be sensible. It’s also important to realise that interest rates can go up, and if you’re on a variable rate then repayments could cease to be affordable, especially if you’ve pushed it to the limit already. The expert advisers at CMME can help you to find a mortgage that suits your needs now, but also taken the future into account.
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 0844 44 88 800 or email CMME on sjd@contractormortgagesuk.com.
You may also find our other contractor mortgage guides and calculators helpful:
Contractor Mortgage Assessor
Contractor Mortgage Calculator
Contractor Mortgage Guide Myths and Facts
30 Second Step by step guide to Contractor Mortgages
Contractor Mortgages
Contractor Self Certified Mortgages
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 11,000 clients.
We are the only National specialist firm of accountants with offices in all major UK cities so you’ll never be far from your accountant. SJD also have more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATII, ATT, ACCA, CA, ACA, FCCA, ACMA. You’ll also be pleased to know that we are one of the lowest priced as well.
SJD have also won every relevant industry award possible, including:
- Winners of the Accountancy Age Awards for Excellence in 2007 and 2004, finalists in 2010 and all years since 2003.
- British Accountancy Awards 'Accountant of the Year' 2011.
- Four time winners of the 'Best Contractor Accountant' award voted for by visitors to Contractor UK 2010 to 2007.
- Institute of Customer Service ‘Customer Commitment’ Award 2011.
- ‘Best Professional Team of the Year’ in the UK Customer Experience Awards 2011.
- More qualified staff than any other specialist firm with qualifications covering: ATII, ATT, ACCA, CA, ACA, FCCA, ACMA.
- Offices in all major cities of the UK.
- Deemed PCG Accredited Accountants and fully MSC compliant.
- Recognised authority on IR35.
We offer all clients:
Free face-to-face meetings. This is another unique service, only SJD offers free face to face meetings - tax is complicated and sometimes only a meeting will do.
Unlimited access to your own dedicated accountant. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant face to face.
Money backed service guarantee. All your telephone calls and emails will be answered the same day or we will refund your monthly fee's.
Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market.
All inclusive low cost monthly package which includes completion of accounts, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, unlimited access to your accountant and all company returns.
All this for a fixed monthly fee of £110 plus VAT, which is one of the lowest prices in the market. And most importantly, in a recent survey 98% of our clients rated SJD as 'better than other accountants' - we are working hard to convince the other 2%!
If you have any question about contracting or would like any further advice please either contact your SJD Accountant or call our new client services helpdesk on 0500 152500 / 01442 275789 or e-mail rachel@sjdaccountancy.com.
Appoint SJD Accountancy and never worry about your tax or accountancy affairs again!
You may also find the following pages, guides and case studies useful:
Take home pay calculator - How much could you be taking home
Contractor FAQ - All your frequently asked questions and their answers
First time Contracting or Freelancing? - A summary of the alternatives along with pros and cons
Choosing an accountant - For a full review
Step-by-step Guide to Contracting - Download a FREE copy of our guide
Limited or Umbrella? Can't decide? - We help you decide which is best for you
Guide to Contracting - All the best guides to contracting in one place
Expenses Guide - Know exactly what you can claim
Umbrella company guide - Everything you ever wanted to know about umbrella company services
IR35 Guide - A great plain English guide to IR35.
