Mortgage Tips for Contractors
If you want to give your mortgage application the best chance of success, then here are five suggestions of how to give it the best possible chance:
Use a Contractor mortgage specialist
There is sometimes a lack of understanding of the way contracting works from lenders who are used to offering mortgages to those in traditional employment. Many of those in call centres or in branches are not trained in how to deal with mortgage applications from those who do not fit their standard script. Because they usually ask for information about your employer and how long you have been with them, you might find that you cannot get any further than this step in the standard mortgage application process.
This is why we recommend that you use a mortgage broker who specialises in finding products which suit contractors. Lenders who process hundreds of applications a day might not be able to ensure that they are able to take every possible situation into account, but there are providers who are more familiar with the way contracting works. These lenders will not be put off when they learn that your employment situation doesn't fit with traditional employment, and they will usually be able to begin the process of applying for a mortgage with just the details of your contract rate, bank statements and appropriate ID. This means that you won’t have to have three years of accounts available or endless references, as they will understand what it means to be a contractor and provide an appropriate mortgage to suit your situation.
Aim for at least a 10% deposit
There was a time 100% mortgages were offered to a range of people, but it is incredibly rare to be offered a deal such as this now. To get the best rates, it is best to have a decent sized deposit saved up, usually between 10% and 25% if you want to access the best rates. If you do not have this level of deposit or if you have no equity in your current property, then there will still be mortgages available to you, but you will have to be prepared to potentially pay higher rates. The higher the level of your deposit, the lower the risk the lender is taking on, so the less you pay for your loan which makes your repayments smaller.
Keep your credit in good order
One thing which will definitely affect your ability to secure a mortgage is your credit rating. Even with a good deposit and a profitable contract, if you have a history of being unreliable at repaying debts, then you could struggle to secure a mortgage. Since the credit crunch, lenders have been encouraged to tighten up their checks and be stricter about who they lend to, so the onus on you is to ensure that you don’t give them any reason to consider you a risk. Make sure you are on the electoral role whenever you move, keep on top of loan or credit card repayments and always keep lines of communication open when it comes to your finances to ensure that you aren’t overlooking anything.
Make sure your contract is up to date
In order to secure a mortgage based on your contract, you will need to have an up-to-date version of it to hand during the application process. Ensure that this contains all the important details you will need such as the rate and length of your current contract. This is important if you want to avoid the time consuming and stressful process of compiling three years’ worth of accounts and providing references to the mortgage company to support your application.
Know your limits
One of the most important things to consider when you take out a mortgage is how much you can afford to repay each month. Lenders usually offer mortgages which are multiples of your current contract rate, but this doesn't mean that you have to take out the maximum loan that they offer you. You will be given details of how much your repayments will be and should consider carefully the implications of taking on monthly payments which may stretch your finances too much. You will need to look at all your financial commitments and be realistic about how much you can afford, as well as considering what you could be paying out if you take out a variable mortgage and interest rates happen to rise.
Whilst a specialist mortgage adviser can help you to find a loan which will suit your circumstances, they cannot predict the future. If you are worried about taking on a large commitment, then it is worth considering your options, such as waiting to save a larger deposit or taking out a smaller and more manageable loan in order to relieve some of the pressure on your finances. If you are looking to re-mortgage your existing property then you will need to ensure that you have an action plan for if your circumstances change.
Whether you are taking on a mortgage for a new home or considering re-mortgaging a property you already own, specialist advice can help you to find the perfect product. If you want to avoid paying more than you need to, entrusting your finances to an expert will help you to secure the best rates around.
You may also find the following contractor mortgage pages helpful:
If you are thinking of buying a property or remortgaging an existing property, Contractor Mortgages Made Easy maybe able to help you. call us on 0844 44 88 800 or email them on firstname.lastname@example.org.