How should umbrella contractors best evidence their income?

There was a time when umbrella contractors/employees were limited company contractors’ poor relation. At least that was the case when it came to borrowing for a mortgage.

But there was a huge sea change with the introduction of off-payroll regulations.

The mass migration to umbrella payroll companies

Once both the public and private sectors adopted the new IR35 rules, things changed. Many contractors had to switch to umbrella payrolls to continue working for their clients.

This had the knock-on effect of excluding those contractors from traditional ‘contract-based underwriting’. But they had umbrella payslips, so relying on their day rate didn’t matter, right?

Wrong!

The problem with umbrella payslips

Contractors who’d struggled to get a mortgage using their accounts were now armed with payslips, like permies. That had to put them in the box seat, didn’t it?

No. Not at all.

There are so many extra fees and deductions on umbrella payslips, they confuse untrained agents and advisers. They show deductions that High Street advisers can’t make fit their risk assessments.

So, how is an umbrella employee/contractor supposed to prove their mortgage affordability?

Using an umbrella contractor’s day rate

So many contractors now use umbrella companies (when it suits) that lenders have had to adapt.

Many of our contractor-friendly lenders‘ bespoke lending criteria use an umbrella contractor’s contract day rate. From a potential borrowing perspective, this puts them on a level playing field with limited company contractors.

But the same rule applies to umbrella contractors as it does to all independent professionals. If you want a lender to take your income seriously, you need a broker who gets contracting. Therefore, a broker with direct lines to specialist underwriters is an absolute must.

The problem is, specialist brokers and accommodating underwriters are rare commodities on the High Street. So, save your shoe leather; begin your search for an umbrella contractor mortgage right here, right now.