Contractor Mortgage FAQs

Frequently Asked QuestionsWhen did you last hear a contractor or freelancer express how easy it was finding a decent mortgage provider? Not recently, I’ll bet.

There are exceptions. But securing any type of finance as a contractor is no gimme for most.

Through both personal experience and engaging on countless forum threads, we know the issues. We’ve come to realise exactly how scarce mortgages for contractors are on the High St since lenders binned the self-cert.

Not that we ever believed self-cert was the right way for contractors to fund buying a home in the first place. It was perhaps the right mortgage choice for Sole Traders and other Self-Employed entities. For those who didn’t declare all of their earnings, well: it worked.

It was very much a case of the banks and building societies saying:
“Well, you just tell us how much you earn. How much of that you declare to the Revenue is your concern.”

The self-employed, including many freelancers, were consistently securing mortgages this way. As such, self-cert also became the go-to product Independent Financial Advisors offered contractors.

As a result, traditional brokers tarred all self-employed people with the same brush. And it stuck. Sad to say, many still do.

The good news is that contractors are in a much stronger position today. The reason: specialist brokers can assess them on the strength of their contract alone.

Going the specialist mortgage broker route is essential if you want to reap the benefits of your contractor status.

You may argue that, yes, we would say that. But many of our past clients have struggled with mainstream lenders before coming to us. So much so that we’ve collated answers to our most frequently asked questions into one resource, here.

The following answers address those past concerns and will help you to define what’s missing from your approach. And it is your approach, not your circumstances, that is tripping you up.

In this 3-part F.A.Q., we’ll:

  1. clarify the contractor status itself;
  2. address mortgage-specific queries;
  3. explain why Freelancer Financials is different from other service providers.

This extensive resource provides all the advice you need to apply for a contractor mortgage with confidence. When you’re done, you’ll realise it’s with the lenders and not with your contractor status where the problems lie.

We challenge you to surprise yourself yet further by realising how much you can borrow through a specialist broker using our mortgage calculator.

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...

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...

Will I need to put down a huge deposit?

Contractors don't need bigger mortgage deposits than permies, with 5% our entry level. The more ANY buyer puts down, the lower their interest rate. Read More...

Are interest rates much higher for contractors?

High interest rates for contractors are a legacy from self-cert mortgages. But lenders with whom we work don’t discriminate against independents. Read More...

How much can contractors borrow?

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

Can I get an "agreement in principle" before making an offer?

We specialise in getting contractors a decision, or agreement in principle. This detail can add considerable credence to your search for a mortgage. Read More...

How long do contractor mortgages usually take to complete?

Because of their simplicity, genuine contractor mortgages often complete in less than a month. Ask your broker if you need a mortgage quick! Read More...

Are there any upfront costs involved?

Fees vary between the type of mortgage you’re taking out and the lender that you’re going with. Lenders can charge some, all or none of the fees. Read More...

What happens after the initial interest rate expires?

Mortgages come with low, fixed-term initial rates then switch to a lender’s variable rate. You can remortgage before paying their inflated SVR! Read More...

Will I have to pay stamp duty?

If your mortgage is above the lowest threshold for zero stamp duty, you must pay it. There are different levels, depending on how much your home costs Read More...

Is it compulsory to take out a lender's insurance with my mortgage?

You don't have to buy a lender's life insurance or protection policies with their mortgage, great news for contractors who source their own cover. Read More...

What do I do next?

After reading our FAQ, you have three choices: try our mortgage calculator, read more guides or, you know, actually make it happen and give us a call. Read More...

Freelancer Financials

As a specialist contractor mortgage broker, Freelancer Financials has access to the whole of the market. This means we're not tied in with any one lender or associate. Our mortgage offers are now available from a number of contractor friendly lenders, with each of whom we've agreed bespoke underwriting terms that work on your contract rate alone.

Why is Freelancer Financials different to other mortgage brokers?

As a specialist broker, getting contractors a mortgage using their contract rate (no accounts or payslips) isn't just what we do, it's ALL we do! Read More...

Why use a mortgage specialist rather than my bank?

Limited company contractors need specialist mortgage brokers to both interpret their income to underwriters and align them with the right lender. Read More...



Author: John Yerou

John Yerou is the owner and founder of Freelancer Financials; a trading style & trade mark of the award winning Mortgage Quest Ltd. One of the most recognised names in providing mortgages for contractors and freelancers across the UK.

In 2004 John began his career in Financial Services as an independent mortgage adviser and broker. John has been instrumental in negotiating bespoke underwriting for contractors with high street lenders.

His presence in the industry as a go-to expert is growing by the day and he is regularly cited and writes in publications both locally and nationally.



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