7 secret weapons to getting a contractor mortgage

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In today’s video, we’ll be discussing getting a mortgage as a contractor. Let’s get into it!

Why Is It More Complicated?

Getting a mortgage as a contractor can be a little more complicated than for those who are simply employed or self-employed. But don’t worry — it is possible. Let’s go through the best ways to get a mortgage as a day-rate contractor.

1. Limited Company Contractors

Many contractors set up their own limited company.

In some cases, it may be helpful to add your spouse as a shareholder or employee.

Many lenders will look at:

• Salaries
• Dividends
• The past three years of company accounts

These are used to assess mortgage affordability.

2. Umbrella Contractors

Due to changes in off-payroll legislation (IR35), many contractors have switched to umbrella companies.

For mortgage purposes, lenders often treat umbrella employees as zero-hour contract workers.

Most banks do not consider umbrella contractors because of the temporary nature of the work.

These applicants will likely need specialist underwriting.

3. PAYE Contract Workers

Contractors on a fixed-term PAYE contract face similar challenges as umbrella workers.

They must demonstrate work history and continuity of employment.

4. How Much Can You Borrow?

The amount depends on:

• Income
• Expenditure
• Commitments
• Credit status
• Time in the same line of work

Your income may be assessed in three ways depending on the type of contractor you are:

• Day or hourly rate
• Self-assessment tax returns (SA302s and tax overviews from your accountant)
• Salary plus profit earned (instead of dividends)

5. Credit Status

Contractors are sometimes seen as higher risk because of temporary work.

It’s important to maintain a clean credit file:

• Keep debts low
• Pay on time
• Avoid defaults

6. Documents Required

Some lenders may ask for:

• Your CV
• Payslips
• A copy of your current contract

Nearly all lenders will also require:

• Proof of ID
• Proof of address
• Bank statements

7. Get Specialist Help

A specialist mortgage advisor can guide you through the process.

They can calculate your day rate or hourly rate and estimate borrowing capacity.

Here at WIS, we specialize in contractor mortgages.

We offer a special contractor mortgage calculator on our website.

Our advisors provide free mortgage advice and can compare mortgage rates to find the most suitable deal.

Reminder:
Your home may be repossessed if you do not keep up with mortgage repayments.