If you are a contractor, you know exactly how difficult it can seem to manage finances by yourself. And when it comes to mortgages? It's even worse.
There is a lot to consider before applying for a contractor mortgage. What mortgage is right for you? What do you need to qualify for the mortgage you want? What interest amount is right?
Before we explore that, let’s understand what professional contractor mortgages are.
What is a Contractor Mortgage?
In simple terms, a contractor mortgage is a long-term loan that is provided to a contractor when they want to purchase a property. For example, if you’re looking to buy a house or apartment, you’ll more than likely need a mortgage.
Most mortgages are just like any other loan, but there are a few things that make them unique. Like all mortgages, contractor mortgages have many different elements to them, such as the level of interest, how the interest will be charged and whether the property is used as security.
Contractor mortgages work just like your typical mortgage, with the caveat that you are self employed, making you appear a higher risk to a potential lender. You simply borrow the capital or a sum of money to purchase your property and then repay the loan over a period of time that is agreed upon by you and your lender. This time period can range anywhere from five to forty years. Depending on the type of mortgage, you will likely have to repay the borrowed capital with interest added to the original amount.
Applying for a Contractor Mortgage
A lot of people commonly believe that because contractors don't have a regular salary from employment, they cannot apply for mortgages. However, that is not true.
Mortgage companies recognise contractors as equal representatives of the workforce, just like any other employee receiving a fixed salary amount. However, due to perceived increased risk, contractors may not able to access the same mortgage options and competitive rates as other salaried employees.
Due to the rising number of people who are now opting for this type of employment, lenders are now updating the eligibility criteria for mortgages. For a lender, your contractor status will usually depend on the way you pay your income tax.
For example, if you are paying tax through self-assessment, you’ll be categorised as self-employed. However, if you work for an umbrella company that pays your taxes and provides payslips, you’ll be categorised as employed.
Some lenders will look at your daily income to calculate the amount you can borrow while others will look at your average annual income over a number of years.
Besides that, a few other factors will also be taken into account, such as the total time you’ve spent working as a contractor. Put simply, the type of contract you’re working under will play a key role in determining how your mortgage will be assessed.
At Acumenica, we can take care of this for you by managing your income, assessing what type of mortgage you should apply for and figuring out the best way to present it to lenders.
3 Simple Steps for Your Contractor Mortgage Application
1. Assessment of Income and Future Contracts
Before you apply for a mortgage, you will need to assess your total contractor income to date, the type of work you do and any future contracts you have lined up. This data will help you understand the best way to secure your contractor mortgage. At Acumenica, we can assist in putting this together.
2. Collect Documentary Evidence
When it comes to contractor mortgages, you need to have evidence for some specific information. This can include your payslips, current contract terms, future projects, proof of your day rate and more. The more documentary evidence you have, the stronger your application will be. At Acumenica, we can assist you in collecting the right information and evidence to maximise the chance that your application is approved.
3. Choose the Right Mortgage Lender
Once you’re ready to apply, it’ll be time to choose the right lender. It's important to choose a lender who has expertise in working with contractors who do the same type of work that you do. For example, if you receive payment on a day rate, you should approach a lender who can offer the best terms for you. With Acumenica’s specialist brokers, you can rest assured that you will be guided to the right lenders.
Choose Acumenica for Finance Management, Contractor Mortgages and More!
It's not easy dealing with mortgages, especially if you have to take care of everything all by yourself. Luckily, Acumenica takes that problem right out of your hands.
With us, you will have the guidance and support of professional accountants, and we can advise you on specialistbrokers who can assist you in getting approved for the right contractor mortgage.
With our experience and expertise, you can rely on us to provide you with the best service and the best deals. When you are partnered with us, we can do more than just get you the best mortgage deals. We also offer financial management, planning, accounting and taxation services.
Enquire now to find out more about contractor mortgages.
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