Contractor Mortgages

There are many ‘perks’ that come with being a contractor. However, being your own boss and deciding your own rules can often be overshadowed by the uncertainty your employment status brings when you are looking to secure a mortgage for your dream house.

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It’s not the job title that makes you less attractive to a lender, it’s the unstable income that can fluctuate from month to month that lenders see as a risk. With self employment on the rise, more and more people may find it difficult to secure a mortgage. However, employing a few simple tips and tricks may be the difference between being accepted for a mortgage or being refused.

Proving Your Affordability

To improve your chances of being accepted for a mortgage, you will need to prove to a lender that you can afford the mortgage and keep up with the monthly repayments. As you are a contractor, it is unlikely that you will have a set, guaranteed amount of income each month, so you will need to provide evidence of your earnings. Usually, a lender will request to see evidence from the past six months at the least, but it’s not uncommon for them to request evidence from two or three years ago.

While those that have been a contractor for a long time may not see this as an issue, those just starting out in the world of self employment will struggle to get evidence that dates that far back, so they are immediately on the back foot if they are looking to secure a contractor mortgage.

How To Strengthen Your Chances

As well as proving your affordability, there are other things that you can do to help improve your chances of securing a contractor mortgage.

Having a good credit score will always make you more attractive to a financial lender and there is no exception when you apply for a contractor mortgage. If your credit score is high and you have a clean credit report (e.g. no defaults or missed payments) then you are showing the lender you are a responsible borrower, making it easier for them to accept you. If you credit score is low, it will be worth improving it before you start your mortgage application, so you are in a better position and avoid damaging your credit score any further.

You could also offer a larger deposit and therefore borrow less, as this will mean the lender doesn’t have to take as much of a risk. The less risk they have to take, the more likely they are to accept you.

If you are entering the mortgage with another person, for example your marital partner, then you would be a more favourable candidate if they are in full time employment. This means your varying income will not be as significant as your partner is likely to earn a set amount of salary per year. Do bear in mind that having a partner in full time employment doesn’t automatically mean you will be accepted, but it will give lenders a reason to consider you.

Reducing the amount of time you have off can also stand you in good stead when applying for a contractor mortgage. It seems small, but showing you are committed to bringing in an income will look good infront of a lender and therefore, make them more likely to accept you.

Finding a lender that specialises in contractor mortgages will give you the best shot of getting accepted, because they deal with people in your situation on a daily basis and are probably more willing to take a risk than a traditional lender.

Mortgage application can be difficult and at times, disheartening, but as mortgage specialists, we can help you secure a contractor mortgage today.