What is a Contractor Mortgage?
In order to obtain a mortgage everybody will need to prove their income. The majority of applicants will have to evidence their income with payslips if employed, or accounts, if self employed. However, as a contractor you have a third option of having your income assessed on the daily rate of your contract.
The mortgage rates offered to contractors are the same as a mainstream applicant.
- Borrow against daily rate
- Increased borrowing in some cases
- Less lenders
The Advantages and Disadvantages of Lending Against Your Daily Rate
The main benefit of working off your daily rate is the extra borrowing that may be available whilst keeping your accounts tax efficient.
However, the disadvantage is that there are less lenders that are happy to lend against your daily rate and, as a result, you may not have access to the best rates. Therefore, we always recommend reviewing your mortgage options based on your accounts first, before going down the contractor route.
How Much Can I Borrow?
In simple terms your daily rate is multiplied by 5 to give your weekly income, dependent on the lender, this figure is then multiplied by 46 or 48 weeks. However, existing credit commitments, dependents, age, childcare costs etc. may reduce your borrowing.
(£500 x 5 days) x 48 weeks = £120,000 income.
The majority of lenders will lend 4.5 times your income with some still offering 4.75 times your income.
£120,000 x 4.5 = £540,000 mortgage.
Contractor Friendly Mortgage Lenders
There are a number of mortgage brokers for contractors to consider:
- Scottish Widows
- Clydesdale Bank
- Virgin Money
- Metro Bank
- Skipton Building Society
- Coventry Building Society
- Saffron B/S
- Furness B/S
- BM Solutions
- Kent Reliance
Limited Company Buy to Let Mortgages
We specialise in arranging buy to let purchases through a limited company. Setting up a limited company is straight forward for many contractors. A limited company allows landlords to hold properties in a more tax efficent manner whilst also accessing lenders with lower rental coverage requirements.
See our blogs on this area for further information
How to Obtain Tax Relief on Your Life Cover and Critical Illness Cover Premiums
An underused option by contractors is a protection policy generically called a Relevant Life Plan. Life assurance and critical illness cover can be taken out to protect yourself but can be claimed as a business expense, offset against your corporation tax bill.
Why Choose NS-FS to be Your Broker?
- We are experts.
- You speak directly to a broker.
- We can normally give a maximum borrowing amount, monthly cost and recommended lender on the first phone call.
We pride ourselves on building great relationships with all our clients, if you don’t believe us, see some of our recent reviews below, or take a look at all of our past reviews.
Although, we feel that this review sums up our philosophy perfectly…
Neil Soundy Financial Services Ltd is an appointed representative of HL Partnership Ltd which is authorised and regulated by the Financial Services Authority.
The Financial Conduct Authority does not regulate some forms of buy-to-lets.
We do not give or imply legal or taxation advice. We recommend you contact a solicitor or accountant for advice in these areas.
Think carefully before securing other debts against your home/property. Your home/property may be repossessed if you do not keep up repayments on your mortgage.