You could get a mortgage on Day 1 of your first contract
When you turn to professional contracting it's a statement of intent.
You incorporate a business, a limited company.
You hire an accountant to optimise your income.
Your capacity to earn more as a contractor than as an employee increases by as much as 50%.
What's more, this transition often comes after an offer of a contract not before. Think about it. Why else would a permie sacrifice a full-time job if they didn't have a safety net waiting?
So with a brand new contract to start, the permie takes the leap into contracting. More than likely, with an agency or umbrella company.
Building the case for a first-day applicant
Also, think about this. Would an agency risk its reputation by deploying an inexperienced contractor? Of course not. They'll have vetted the new contractor before offering them the role.
With the shift in the labour market, especially in IT, the future looks peachy. Opportunities for contract extensions or new roles await when the current contract expires.
So, the new contractor has earned the chance of this new lifestyle with their work history. Their continuity is also somewhat secure. The ideal mortgage applicant, right?
You can take a horse to water…
Well, take that scenario to a High Street lender and see what they say. Especially if it's your first day of your first contract.
A traditional lender will struggle to accept industry experience as continuity of employment. They won't see opportunities past your new 6-month contract as longevity. Not at branch level, anyway.
Specialist brokers deal with underwriters for specialist borrowers direct. These brokers can package an application so that their (thus, your) underwriter gets it.
Such underwriters see time-served as a positive. They know the contracting world and can make the right call about long-term security.
Yes, all other details must point to you being low risk:
- a perfect credit history;
- a smart CV;
- utility bills at your registered address and/or a passport as proof of ID;
- bank statements that show income up to the point of the new contract;
- and the contract itself, outlining top-line income potential.
If you have all that together, little history as an actual contractor shouldn't matter.
But do take your enquiry to a mortgage broker who specialises in contracting. Make sure they understand limited company payment structures, not just 'self-employed' accounts. Beyond those factors, that you're new to contracting shouldn't be a disadvantage.
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.