The thought of securing a mortgage as a business owner or contractor without a regular paycheque might seem like an uphill struggle. But fear not. Whether you’re treading the path of homeownership for the first time, looking to move home or buy a rental property, we have the answers.
Based on the most common questions we’ve been asked, this guide will help you achieve some clarity regarding mortgages that we hope will help put your mind at ease. It’s not impossible to secure a mortgage as an independent professional or business owner; you just need the right people in your corner. From rates to paperwork, we’ve decoded the details so you can prepare to secure the mortgage you need.
Can I Rely on High Street Brokers? Absolutely. You have options like banks and high street lenders. But, if you’re looking for a tailored approach that understands the contractor landscape inside out, it’s wiser to opt for a specialist broker. They have a treasure trove of mortgage products designed with your unique financial scenario in mind.
Do Contractors Face Higher Interest Rates? No, the days of contractors being branded as ‘high-risk’ are gone. Mortgage rates for contractors are on par with those for traditional employees. Your employment status shouldn’t have to impact the rates you pay.
How Many Years’ Accounts Are Needed? Good news – your contract rate alone can often secure contractors a mortgage. For limited company Directors the last two years’ self-assessment tax returns are needed, and in some cases corresponding accounts too.
What Documents Do I Need? Essentials include proof of identity, address and income. If you’re going with your contract rate, your contract copy is crucial. If company accounts are your income proof, signed copies are the name of the game.
What’s an Agreement in Principle (AIP)? Think of it as a preliminary nod from a lender. It’s not a guarantee, but it gives you the confidence to make an offer. AIPs usually remain valid for 30 to 90 days.
What’s a Mortgage Offer? It’s the green light you’ve been waiting for. A formal confirmation from a lender that they’ll lend you a specified sum. Remember, it’s subject to certain conditions and generally valid for 3 to 6 months.
How Much Can I Borrow? Your income, be it contract rate or accounts, dictates the range. Contractor experts estimate around 4.5 to 5 times your income. For example, a daily rate of £400 might let you borrow up to £432,000.
Do I Need a Large Deposit? It’s not a must, but a larger deposit (10% and above) scores you better interest rates. However, options exist even with a 5% deposit.
What Stamp Duty Will I Pay? Stamp Duty Land Tax (SDLT) is based on the property price. You can find out your SDLT using this calculator. There is an SDLT discount if you’re a first-time buyer and a premium to be paid if you own a property. The tax is paid upon completion of the property purchase, so make sure you put aside funds to cover this additional cost.
What Other Costs Should I Expect? Broker fees, application fees, stamp duty, solicitors’ fees, and surveyors’ costs are typical expense types when you embark on a mortgage journey. It’s important to account for these when you start the mortgage process.
Ready to Get Started?
Fill out our Speak To An Expert form or get in touch with one of our expert mortgage advisers directly today. Throughout a short call to find out more about you, we can set you on your way to securing the mortgage you need.