Can I get a mortgage as a contractor?

18th June 2019 / in Contractor, Mortgages / by Gordon Hunter, MD

As a contractor have you faced any difficulty in getting a mortgage through the traditional routes? You are not alone.

Contractors benefit from a high degree of flexibility and independence when it comes to their working life – and the numbers of contractors in the UK is increasing every year. However, despite the many benefits a lot of contractors are unsure where to turn when they want to buy a house and are in need of a mortgage.

Why do contractors find it difficult to get a mortgage?

There are several reasons as to why some contractors find it difficult to be successful in a mortgage application.

Many people directly approach their bank with a view to getting advice or applying for a mortgage directly. Limiting your options to your bank is generally not the best thing to do in any mortgage process, and that includes contractor mortgages.

A lot of lenders fail to recognise that the earning potential of contractors can often be higher than those in full-time positions. But, as contractor work is based on specific projects it is viewed by many banks as a less secure loan.

As a result of this, it’s possible that as a contractor your lender might require you to have as many as two or three years’ worth of financial statements to back up your application.

So can I get a mortgage as a contractor?

Yes! Despite lenders making life a little more difficult, specialist contractor mortgage brokers like ourselves at Super Contractors ensure that any contractor can get a mortgage.

Thankfully in recent years banks have begun to adapt to the increasing numbers of contract and freelance workers in the UK – and many have specialist underwriter divisions which deal specifically with contractor mortgages.

Increased scrutiny will be given to the technical content of these mortgage applications. While the underwriter reviewing your application may not be an expert in IT or whatever field you are in, they will have a team that knows the difference between a developer, engineer and a manager and what the long-term outlook is for the work you are carrying out.

Ensuring that lenders understand the risk profile of the candidate is a key part of the process, and can be a delicate thing to manage. A good specialist contractor mortgage adviser will have gone through this process time and time again for many years.

What can I do to improve my chances of getting a mortgage as a contractor?

There are a number of things you can do as a contractor which will improve your chances of getting a mortgage:

  • Offer a larger deposit – borrowing less money from the lender reduces the risk on their behalf
  • Maintain a good credit rating – as with any mortgage application it is important to ensure your credit rating is not affect by large credit card debt or missed payments.
  • Avoid lengthy contracting breaks – whilst flexibility is a major benefit of contracting, having a major period of inactivity is not likely to be looked upon favourably.
  • Show evidence of long-term contracts – ongoing and lengthy agreements with employers show stability and reliability for your application.

Engaging a specialist broker that knows the contractor environment will help to allay many of the typical concerns that contractors and freelancers have in relation to mortgages. They can help you avoid the need for providing irrelevant revenue and customs documents by approaching the application in the right way.

Answering the question ‘can I get a mortgage as a contractor?’ – the answer is a resounding yes – but you should take care and get advice from a specialist mortgage adviser who understands the way the market works.

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