How does contracting affect mortgage applications?
We’re all aware of the flexible working benefits offered when you choose to become a contractor, however, due to fluctuations in earning and uncertainty; many contractors have historically faced difficulty when trying to secure mortgages.
Mortgage lenders will usually assess the applicant’s income, expenses and security to make informed decisions on how much to lend. While it may be trickier for contractors and self-employed individuals, it is still an achievable goal with the right support and paperwork behind you.
How much can a contractor borrow?
As is the case with normal mortgage applications, lenders will want to see an average of 2-3 years of previous years earnings, including expenses, in order to make an affordability assessment.
How is your income assessed?
Mortgage lenders will often look at a contractor’s average income over their recent years of trading. For example; if a contractor earns £50,000 in year one, and £60,000 in year two, then an average income of £55,000 will be assumed. If you are paid on a day rate, then some lenders may also use this to determine what an average years’ salary would amount to.
In many cases, a contractor's income each year has been much more varied than the previous example, and the pandemic has caused even more earning inconsistencies, which can make the process more difficult.
Contractor mortgages – key tips
There are many ways to strengthen your mortgage application as a contractor. Consistent contracts with certain clients, agreements with employers, or evidence of past agreements will indicate ‘long-term security’, improving the likelihood of your application being successful.
Larger deposits will put your application in good stead and make banks more likely to lend to you, and ensuring and maintaining a good credit score can also only benefit your case. Many lenders may be put off by large breaks in-between contracts, so trying to reduce these in the run up to a mortgage application is also good practice.
Mortgages for contractors with Procorre
Are you a contractor who needs support with getting a mortgage?
Procorre have close relationships with mortgage advisors who specialise in assisting contractors with all of the necessary paperwork and administration for getting a mortgage.
Procorre Partners can take advantage of this benefit, along with many others when they join the Procorre Partnership.
Get in touch today to learn more about how we can support you.
