Contractor
Mortgages

Finding a contractor-specialist broker on the High Street can be challenging. Even lenders that offer contract-based underwriting typically do so through specialised underwriting teams.

These teams are almost always located at the lender’s head office, not at local branches. Additionally, most are ‘intermediary-only,’ meaning they only interact with appointed or accredited brokers like us.

By working with a broker like us, you can bypass the High Street branch network and call centers, gaining access to a wider range of options.

Securing a mortgage when you’re self-employed can prove more intricate compared to those in traditional full-time positions, primarily due to the distinct nature of income verification.

Lenders seek assurance that you have the financial capacity to consistently meet your mortgage payments without posing a risk to their investment. Self-employment often involves income fluctuations from month to month, which can lead lenders to perceive it as less stable than traditional employment. Consequently, some lenders are ill-equipped to navigate the complexities associated with self-employed income and may simply decline your application.

However, this is not the case with all lenders. This is why it’s advisable to collaborate with a specialized self-employed mortgage broker who possesses an in-depth understanding of these challenges. Our team of Mortgage Experts deals with such scenarios on a daily basis, and they are well-versed in identifying the right lenders and mortgage options tailored to your unique situation. Feel free to reach out and explore the mortgage options available to you as a self-employed individual.

When you’re self-employed, you could fall into one of these categories:

1. Limited company director
2. Freelancer
3. Contractor
4. Sole trader
5. Business partnership
6. Gig worker
7. Agency worker

Each of these categories entails different financial and tax considerations. This is why it’s highly advisable to engage the services of a mortgage broker with expertise in self-employed income. Our team has extensive experience in navigating situations similar to yours.

Many mainstream lenders typically require you to provide two or three years’ worth of accounts as evidence of your income, which can pose challenges if you’ve recently transitioned to self-employment and are seeking a mortgage. However, there are numerous specialist lenders who are more flexible in their criteria and may consider your application without this extended history.

Specialist lenders still necessitate proof of income but may accept a wider range of documentation. Some of the self-employed mortgage providers we collaborate with are willing to assess your eligibility even if you have one year or less of financial records.

To ascertain which lenders are likely to approve your application and understand the specific documentation requirements, it’s advisable to consult with a specialist self-employed mortgage broker like us. We can guide you through the process and help you find the most suitable options.

The classification of self-employed income that mortgage lenders consider depends on your specific business structure. Here are a few examples:

1. Sole traders can use either their net profit (when presenting accounts) or total income (if providing an SA302).
2. Partnerships can utilize their portion of net profit (when using accounts) or their share of total income (if presenting an SA302).
3. Limited company directors can include their director’s salary, dividends, and, in some cases, retained profits.

In addition to your primary source of income, some lenders may also accept other forms of income, such as investments, rental income, pensions, and benefits.

When you’re self-employed and applying for a mortgage, you’ll need to satisfy the lender’s eligibility criteria, which typically include:

1. Demonstrating a consistent income history: Lenders usually prefer to see two or three years of financial records to assess your income stability. However, some lenders may consider your application even if you have a shorter financial history, provided you can demonstrate financial stability.
2. Providing evidence of diverse income sources: Being able to show proof of various income streams can bolster your mortgage application.
3. Making a deposit: The required deposit amount is generally not higher solely because you’re self-employed. However, if your financial situation is considered ‘risky,’ such as having a limited trading history, a lender might request a larger deposit.
4. Meeting credit criteria: Any adverse credit history, like CCJs, IVAs, repossessions, or bankruptcy, can impact your mortgage application and potentially make approval more challenging. Consulting with a specialist broker can help you explore your options.
5. Documenting your finances: Be prepared to provide documentation such as bank statements, proof of income, and evidence of your deposit. Some lenders may also request to speak with your accountant.
6. Having an accountant (optional): While some lenders may require you to have an accountant they can contact for verification, this is not a universal requirement.

Navigating these criteria effectively with the help of a specialist broker can improve your chances of securing a mortgage as a self-employed individual.

For self-employed individuals, mortgage terms are determined by the lender, just as they are for those in full-time employment. The borrowing amount is typically calculated based on your income from the past few years, although some lenders may base it solely on your earnings from the previous year.

The calculation of your mortgage also varies depending on your specific self-employment status. For instance:

1. Sole traders or partners have their income assessed based on net profits.
2. Limited company directors have their income evaluated by considering their salary and dividends.

To obtain a mortgage, you will generally need to provide documentation as proof of your self-employment income. This requirement is essential for lenders to evaluate your financial capacity and make an informed lending decision. Without such evidence, lenders cannot properly assess your affordability.

Here are several examples of documents you can use to demonstrate your income to a lender:

1. Limited company accounts
2. Payslips and/or P60 forms
3. Bank statements
4. SA302 tax calculation forms
5. Accountant certificates

Typically, mortgage lenders expect a minimum deposit of 10% of the property’s value when applying for a mortgage. However, many mainstream lenders are less equipped to handle income situations that deviate from traditional employment.

When you’re self-employed, verifying your income can be more challenging, which may lead to a lender requesting a larger deposit. Having your financial affairs well-organized can greatly assist you in the mortgage application process.

If accumulating a substantial deposit is challenging for you, there are still viable options available. Our team of Mortgage Experts specializes in self-employed mortgages and will diligently seek out the most suitable mortgage solutions tailored to your circumstances. Feel free to make an inquiry to explore your available options and get started.