Lenders like 4-6 weeks left on contracts and for good reason
Unlike for permies, timing of a contractor's mortgage application can be crucial. As well as proven history in an industry, lenders also need continuity.
The longer you have left on your contract, the less risk they'll attach to your application.
Most lenders like to see at least 4 to 6 weeks left on a contract to approve a mortgage.
The longer time you have left to run, the better you'll satisfy their risk assessment.
What happens if I've got less than 4-6 weeks?
If you have less than 4-6 weeks left on your contract, don't throw in the towel. There are actions you can take to counteract an imminent contract expiry date.
Contract extension or renewal
The first and most helpful action is to approach your agency or client direct. Tell them you need a bespoke contractor mortgage, thus a contract extension or renewal. If they ask why, explain that it's to satisfy a lender's risk assessment.
You'll find most people amenable. It will help your cause no end if you've taken the time to develop a rapport with them. It will satisfy lenders further if you've had successive contracts with the same client.
Get a credit report and act on its findings
The other important safeguard is getting all your other ducks in a row. Take a look at your credit report and see what you can improve. Overdrafts, loans, credit cards: can you bring any of them down?
Again, reducing what you owe elsewhere reduces a lender's risk. If you've done all that, we can often add our weight to your application. In specific circumstances, we will negotiate the remaining duration element. But everything else has to be perfect if we're able to do so.
Affordability checks: they're called risk assessments for a reason
In some circumstances, it might not be possible to get a renewal or extension. This may be down to your client or agency. Or you may have a big break planned that makes renewal implausible.
It could be that you do have a lot of other debt. And, for whatever reason, you can't bring that debt down right now. Perhaps you've scraped a deposit together and paid the bare minimum elsewhere to get it.
In both of these instances, it might be time to put the brakes on. Affordability is not only a factor for a lender, but for you as a borrower, too.
No one wants to put you in a position of financial hardship. Reduced income and other debt could be a catalyst for that scenario. That's why lenders like a guarantee of contract continuity and why you should, too.