Home Mover Mortgage

By all means, go to a high street lender to satisfy your curiosity, but in most cases, the lender will have issues with how income reaches the contractor. High street lenders understand dividends, but business owners, professionals and contractors who are tax efficient and only draw down a minimum salary and dividends to meet their needs won’t look good. Specialist brokers like us go to the same lenders you see in the high street but at the head office underwriter level. This means they are speaking to people with a bigger lending mandate and a knowledge of this sector contractors, and they use the contract to define a contractor’s income.

Lenders who specialise in mortgages for those earning a day rate typically assess the amount that can be borrowed on the annualised contract value. Each client is evaluated on the basis of their personal circumstances, generally, they can borrow a multiple of their annualised contract value.

However, they need to be in a contract at the time of the application and must be able to demonstrate continuity. A contractor applying with their first contract can get a mortgage as long as they have had continuity of employment before approaching the broker.

This is where a contractor specialist financial adviser differs from most brokers. There is a two-stage process. The first stage is the pre-approval, and the second stage is the full application.

In stage one, the lender requests documents from the business owner, professional or contractor such as current and previously signed contracts, three months’ personal and business bank statements, ID and proof of address. The lender will also complete a hard credit search at the point of application. After reviewing all documents and credit score, the lender will approve or decline the application.

Stage two is the full application stage. If the application has been approved the valuation will then be instructed, and if the valuation is satisfactory, the mortgage will go to offer. In some examples, the mortgage loan amount may be reduced following an underwriting review or the mortgage can be declined. Your broker would then agree with you on how you wish to proceed.

Brokers do have options for contractors who have a poor credit history and need specialist contractor underwriting for their mortgage. They will need to present a relatively positive picture of the client’s current circumstances and as long as the credit issues are historic and there has not been an issue within the last two years, but can usually find an option.

There are lenders who don’t do credit scoring but just complete credit checks. Financial advisers like Broadbench, with unrestricted access to the market and who are not restricted to just a handful of lenders, should be able to find a solution. However, the contractor will pay a premium with an elevated interest rate as a result of their poor credit history.

If a contractor has any plans to buy a property or refinance it is important that they talk to a specialist contractor financial adviser as early as possible, even if their plans are 12 months away.

That way the broker can find out early if there are any challenges and we can overcome them in plenty of time for the contractor to secure their mortgage when they need it.