Contractor Mortgage FAQs

When did a contractor or freelancer last tell you that finding a decent mortgage provider was easy?

There are few exceptions, with mortgage lenders defaulting to ‘self-employed’ lending criteria. For limited company contractors and directors, that’s rarely the optimal choice.

Through both experience and engaging on countless forum threads, we know the issues professional contractor face. Barrier after barrier, disappointment after heartache. But there is light at the end of the tunnel!

What are the answers to the contractor conundrum?

We realise how scarce mortgages for contractors are on the High Street. Especially since lenders have thrown the book out the window since lockdowns became a feature of our everyday lives.

The following questions and answers result from our experiences with clients. Many answers cover all homebuyers, not just independent professionals.

But it’s self-employed contractors who need help clarifying their income the most. We’ve split the Q&A into a “Contractor” and “Contractor Mortgages” sections as best we can to satisfy those doubts.

There are overlaps. So, if the lines become too grey, do call us for a confidential chat and leverage our expertise. Thank you.

Contractor

Let's start with the basics. Many contractors don't actually realise that that's what they are. Now that seems a strange statement, but one worthwhile pointing out. Many see themselves as freelancers, but there's a subtle - and very important - difference. We don't want to give anyone false hopes about what we can and can't do for them.

What does becoming a limited company contractor entail? %

Before going through our contractor mortgage FAQ, it's worth getting to know what a contractor is, especially in the eyes of a mortgage lender. Read More...

What is a contractor mortgage and how hard is it to get one?

Why can't I get a genuine contractor mortgage using my top line contract income on the High Street? Do lenders even know they exist? Read More...

Why can't I get a contractor mortgage in a High Street branch?

Most High Street lenders' mortgage affordability checks default to accounts for self-employed applicants, thus ignoring contractors' retained profit. Read More...

Having just started contracting, will I be at a disadvantage?

Amiable lenders base mortgage offers on contract rate, industry history and CV. Combined, these factors usurp how long you've been a contractor. Read More...

What remaining time do I need on my contract for a mortgage?

Duration lenders like contractors to have left to run on a contract before they'll approve a mortgage is normally 4-6 weeks, but there are exceptions. Read More...

Do I need 3 years accounts to prove earnings for a mortgage?

Most traditional lenders try to get mortgages for limited company contractors using accounts. You need a lender who can process contract-based underwriting. Read More...

What should contractors working via an Umbrella Company do?

High St mortgage lenders like payslips, so umbrella contractors should get offers no problem, right? Mm, no! You're better off using your contract rate Read More...

What supporting documentation must I provide to evidence income?

Contractor mortgages are a breeze when you use a specialist broker. The documents you need to support your application are few and uncomplicated. Read More...

Contractor Mortgages

We've ascertained that mortgage lenders make many incorrect assumptions about contractors. But it's not all one-way traffic. Conversely, those new to being self-employed also don't yet understand how the products on offer to them differ from what they may have been used to as a permanent employee.

How do standard and contractor mortgages differ?

Usual mortgages use PAYE salary to work out affordability. Contractor mortgages use contract-based underwriting ('annualised' contract/day rates). Read More...

I've had a self-cert mortgage before. Are they banned, now?

Lenders ousted self-cert mortgages during the credit crunch. Credit-based underwriting was - and is - the best way for contractors to buy a home. Read More...

Do contractors need to find a huge deposit for a mortgage?

Contractors need no bigger mortgage deposits than other homebuyers. But the more ANY buyer puts down, the lower their interest rate will be. Read More...

Are interest rates higher for contractors than other borrowers?

Walk into a High Street lender and you're going to get offered high interest rates. They don't get contracting. Use a broker who does. It's worth it! Read More...

How much can contractors borrow for a mortgage with day rates?

To maximise their income, a contractor needs a lender who uses day rates (not accounts) as the basis of their mortgage affordability calculations. Read More...

Should I get an Agreement in Principle before making an offer?

An Agreement in Principle can go so wrong for contractors. They can strengthen your mortgage position, but also mask disaster from the wrong lender Read More...

How long do contractor mortgages usually take to complete?

Because of their simplicity, genuine contractor mortgages often complete in 4-6 weeks. If you need a mortgage quick, speak to your broker today! Read More...

Are there any upfront mortgage fees or hidden costs involved?

Fees vary, from the type of mortgage itself to the lender from whom you're borrowing. Lenders can choose to charge some, none or all of the fees. Read More...

What happens after the fixed initial interest rate expires?

Mortgages start with a fixed-term initial interest rate then switch to a higher variable rate. You can remortgage before overpaying an inflated SVR! Read More...

Are life and buildings insurance compulsory with my mortgage?

You don't have to buy a lender's life or buildings insurance with your mortgage. Don't write their cover off, but you have many other options today. Read More...

I've read the FAQ; what steps are next to get the mortgage?

Compile your documents, work out deposits and what you can borrow, sort your credit file, an AIP and surveys, negotiate, then call your broker! Easy! Read More...

Author: John Yerou

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.