Specialist lender Kensington has declared its doors wide open to contractors. Even to those who may have struggled to secure a mortgage in the past. How positive a start to 2014 is that?
There are now a variety of deposits and interest rates on offer for contractors with any level of income. This is a game-changing move by Kensington and not unwelcome.Independent professionals beyond IT or Oil & Gas industries have struggled, to date. Even those earning less than £312.50 per day/£75k gross earnings have come up short.
Now, restrictions imposed by some contractor-friendly lenders need not be a barrier.
There’s an added bonus, too. The early indication is that a less-than-perfect credit history may not be an instant “No!”. Worth a closer look? You bet!
The What Mortgage Awards 2013 voted Kensington best Intermediary-Only Lender. They followed that success with Best Specialist Mortgage Lender 2013-14 (Your Mortgage Awards). So, we’re not dealing with mugs, here.
Sorry, what does Intermediary-Only mean?
It’s when a financier only promotes their products or service through brokers and do not deal direct with the public.
Why limit themselves like that?
It’s so that their primary focus can remain on improving their product range.
Dealing through intermediaries is common to lenders who specialise in dealing with niche sectors. The brokers who provide the first point of contact do the vetting. This leaves the financier free to advise and arrange the mortgages themselves.
Their legend, with the caveat of responsible lending, is simple:
‘Helping those who can afford their own home, to own their own home.’
The mortgages Kensington launched on January 13th, 2014 target both contractors and freelancers. Their products accommodate a range of deposits, starting at 15%, rising to 20% and 25%-upwards.
There’s a choice of 2- and 3-year fixed deals for those who can find 20% or 25% to put down. Only a 2-year fixed interest mortgage is on the table for those with the lowest deposit they’ll accept, that being 15%.
Respective interest rates decrease, the larger the deposit/lower the LTV ratio, as you’d expect. The 3-year terms also cost a little more than the 2-year products, where applicable.
Again, no real surprise there. If you want to budget for three years, the lender needs to cover themselves. Think Responsible Lending guidelines, rather than avarice and you’re on the right track.
A 25% deposit (75% LTV) attracts 3.44% for the 2-year fixed product. If you do want to fix your budget for three years, Kensington are offering 3.64% over the longer term.
For those who can muster 20% (80 LTV), the 2-year fixed will cost them 3.99%. Compare that with the 3-year fixed offer, which comes with a 4.19% interest rate.
With a 15% deposit (85% LTV), the sole 2-year fixed deal will avail you of 4.74% for the fixed period.
No matter which of their contractor mortgages best suits your budget, there’s a set £100 Admin Fee and a £999 Completion Fee.
The introduction of this range of mortgages, in our opinion, reflects the growth of the UK contractor market. There are almost a quarter of a million more people working on bespoke contracts today than there were a decade ago.
Even so, lenders aren’t factoring the way contractors work into their mortgage affordability calculations. Well, few of the recognisable High Street banks are, to date.
Kensington has seen the meat that those mainstream lenders are leaving on the table and pounced! Now it’s up to you to dip your bread.
As you’d expect, there are certain minimum requirements you must meet to begin an enquiry. But they’re not as steep as those imposed by many other lenders, by any stretch.
Kensington won’t take into account any CCJs accrued or default mortgage payments longer than two years ago. Neither will affect your creditworthiness across the spectrum of specialist mortgages Kensington offers.
What does this mean? If your last 24 months’ credit payments have been faultless, you’re in something of a strong position.
This is awesome news for contractors who’ve had applications turned down elsewhere. The High Street’s lending criteria can be much stricter and a lot less flexible.
With regards to your work history, again Kensington comes up trumps compared to the High Street. There’s no need to present 2- or 3-years’ worth of accounts.
As long as you’ve been contracting for the last 12 months without a large break between contracts (more than six weeks), you meet the minimum criteria.
They work out your annualised earnings by taking your current weekly contract rate and multiplying it by 46 weeks.
Your affordability is then entered into an equation, which takes other details about you into account. The thresholds of how much you can borrow are a result of that calculation.
Just as your business is unique, Kensington treat your application in a similar way. There’s no one-size-fits-all calculation, which supports their status as a responsible lender.
Granted, the interest rates may not be the most competitive. But we believe that the more relaxed lending strategy will open doors once closed to contractors.
In our own portfolio, we have products with more competitive rates and that require smaller deposits. But if this range ticks all your boxes and you’ve had no success elsewhere, it could be the one for you.
Any addition to our range of mortgages that helps independent professionals own their own home is welcome. We’d love to be the ones to make your dream a reality and introduce you to Kensington’s range of contractor mortgages.
John Yerou is a pioneer of contractor mortgages and owner and founder of Freelancer Financials, Contractor Mortgages®, C&F Mortgages and Self Employed Mortgages, trading styles and brands of the award-winning Mortgage Quest Ltd.