Mortgages can be a tricky subject for contractors. When it comes to securing a mortgage, most lenders ask for at least two years worth of accounts, detailing the contractor’s income, expenses and operating costs. The more evidence, the better.
With an unpredictable income, this is often easier said than done. Since the nature of work means that a contractor’s income can fluctuate, it was no surprise that many looked to an alternative.
This led to the rise in self-certification mortgages, which are now banned in the United Kingdom.
What are self-certification mortgages?
Self-certification mortgages allowed individuals to borrow money without the need to prove their income. In 2011, the Financial Conduct Authority (FCA) put an end to these types of mortgages, in an attempt to ensure that all borrowers prove their ability to repay in advance.
Self-certification mortgages were originally aimed at contractors, freelancers and the self-employed, who had trouble proving their income. In many cases they became the mortgage of choice for contractors on irregular incomes who also had difficulty securing a mortgage with their bank.
However, with the removal of these specialist mortgages, many contractors were faced with the thought that it could become difficult to secure mortgage funding for new properties, or even refinancing with their own mortgage providers.
How can I source a mortgage as a contractor?
If you are a contractor looking for a mortgage, we recommend specialist mortgage company CMME, who can help you to secure mortgage borrowing with high street lenders taking the whole of your contract earnings into consideration.
For an estimate of how much you can borrow, visit our contractor mortgage assessor.
Andy McBride, Director at CMME commented “The fact that so many self-certified mortgages were granted to employed workers who could prove their income, and the high level of arrears associated with these type of loans shows that self-certification mortgages were being abused by both individuals and brokers. At CMME, we wouldn’t advise a professional Contractor or Freelancer to go down the self-certification route, if you approach a specialist contractor mortgage broker then they should be able to secure you a competitive mortgage that is based upon appropriate evidence of income.”
“It is the opinion of CMME that the FCA are correct to tighten up lending criteria, as any Contractor or Freelancer that can adequately afford a mortgage should have no need to go down the more expensive self-certification route to secure borrowing”.
Other Pages on Contractor Mortgages
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SJD are not authorised to offer regulated mortgage advice. SJD are introducers to CMME.
Your home may be repossessed if you do not keep up repayments on your mortgage.
CMME is a trading name of CMME Mortgages and Protection Limited. Authorised and regulated by the Financial Conduct Authority (FCA reg. 414798). Registered in England No. 04886692. Registered Office: Albany House, 5 Omega Park, Alton, Hampshire, GU34 2QE. Please be aware that Commercial Mortgages, Overseas Mortgages and some Buy To Let Mortgages are not regulated by the Financial Conduct Authority. Calls may be recorded for training and security purposes and to improve the quality of our services.