“Everyone’s an expert…”
Everyone seems to be an expert on the contractor mortgage market. Jump on the forums and you’ll find people commenting on everything from “self-certification” to “sub-prime” mortgages. This information can be confusing and may not be accurate. We heard too many contractors retell their colleague’s mortgage horror stories.
Don’t always believe what you read on the internet. Speak to a specialist with experience in the contractor mortgage market. Read on for our top 7 contractor mortgage myths – BUSTED.
- Contractors need to have at least 3 years of accounts to get a mortgage
Wrong. Contractors can get a mortgage based on their day rate. You don’t necessary need those elusive 3 years accounts that you’ve heard. Working with contractor friendly lenders means we may be able to arrange a mortgage based on your current contract, rather than the number of years you have been working as contractor.
- Contractors must have been contracting for at least six months
False. Contractor friendly lenders can help if you’ve just taken the jump from a permanent position and have only been contracting for as little as one day.
- Contractors are labelled as high risk by the banks and building societies when it comes to getting a mortgage
Untrue. Mortgage lenders who understand contractors and freelancers will not necessary see you as any more high risk than a full time employee. You may be able to borrow around 5 times your day rate. If you have a poor credit rating and no deposit, then absolutely – you could be a liability to them. But that would be the exact same for a permie.
- Contractors need a mortgage deposit of at least 50%
Nonsense. At the moment you would need at least 5% of a property’s value to get a mortgage. Obviously having a larger deposit will make you less risky for mortgage lenders and as result they’ll generally offer you more competitive mortgage deals with lower interest rates – but it’s definitely not mandatory to have at least 50% deposit.
- Lenders will always charge contractors a higher mortgage rate than permies
Rubbish. Contractors will receive generally the same interest rates as permanent staff. With higher daily rates compared to employed colleagues, you may even receive lower mortgage rates, as you may be in a better position to put more savings aside providing a larger deposit.
- Contractor must have self-certification to get a mortgage
No, no, no! Self-certification mortgages are something of the past. They were originally aimed at self-employed and contractors who had trouble proving their income to secure mortgage borrowing with their bank. The FCA put an end to these type of mortgages back in 20091. Now, with many contractor friendly lenders and specialists available who understand your financial status – there is no need for these “self-certification” mortgages.
- Contractors need to jump through more referencing loops for a mortgage
Garbage. You do not necessarily need references to get a mortgage. As long as you have the 5 essential documents you need to get a contractor mortgage and you speak to a contractor specialist who knows the criteria of contractor friendly lenders, your mortgage can be processed at a significant speed.
At Super Contractors, we specialise in contractor mortgages. My team understand the financial status of contractors and work alongside head office underwriters who are contractor friendly to get our clients the mortgage they need.
For more information about getting a mortgage as a contractor, join us – call 0800 211 8700 or fill out our online enquiry form
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
1. Last major seller of self-certification mortgages pulls out, Nov 2009 http://www.theguardian.com/money/2009/nov/04/platform-ends-self-cert-loans
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Super Contractors is a trading style of Contract Mortgages Ltd which is an appointed representative of First Complete Ltd which is authorised and regulated by the Financial Conduct Authority.