Accord Mortgages: Contractor Mortgage Lending Criteria
Accord Mortgages are an intermediary-only mortgage lender of Yorkshire Building Society Group. The Yorkshire you'll have heard of. They are the UK’s second largest mutual building society with assets worth more than £35 billion.
But what does intermediary-only mean? In this case, the lender will only deal with applicants via selected brokers.This is commonplace for lenders, even big ones, who accommodate specialist borrowers. As an independent contractor, you are a specialist niche; your income is far from standard:
- limited 'job' security;
- different clients in a short period;
- complicated payment structures.
These factors add up to one thing: you're unlikely to be successful with a High Street adviser.
Accord Mortgages understand this so, yes, they will offer mortgages for contractors. But only through self-appointed mortgage brokers.
A new lender in accord with our own ethos
It gives Freelancer Financials great pleasure to announce that we're one such broker. Accord has included us amongst four specialist brokers to pilot its contractor mortgages. It means we can add Accord's contractor lending criteria to our ever-growing portfolio.
Accord's contractor lending policy will consider contractors with at least 12-month contracting history. They should have three months or more left on their current contract.
If there’s less than three months remaining on the current contract, all's not lost. Accord will still consider contractors providing they have a two-year track record contracting.
One of Accord's USPs is that they allow a gap of up to eight weeks between contracts in the last 12 months. In comparison to other contractor-friendly lenders, this gap offers huge flexibility.
What income should contractors earn for an Accord mortgage?
Accord Mortgages sets one of the highest income rates as its lower threshold. Limited company contractors will need to earn at least £75,000 per annum, gross, to qualify. That translates to a day rate of £400.
That said, Accord will provide an exception to PAYE umbrella contractors.
Accord will still consider umbrella contractors who meet all criteria but minimum income. To offset that lower income, the lender will need to see a two-year track record of regular earnings.
Some of the most competitive contractor mortgage rates today
Accord offers consistent, competitive mortgage rates across the board. Yet the level of entry is with a 10% deposit, or max loan-to-value of 90%.
Until now, its rates have been the sole provenance of the PAYE employed worker. That's changed now that Accord is broadening lending criteria to include contractors*.
True. Accord is targeting higher income contractors who earn at least a day rate of £400. Nevertheless, offsetting risk against top earners is a step in the right direction!
*At this point, Accord can't accommodate zero hour and seasonal contractors.
What documentation will I need to get a Contractor Mortgage?
Accord isn't asking for reams of documentation to evidence your earnings. It's the same with most tuned in lenders offering contract-based underwriting.
- The lender only needs relevant data to process your mortgage application, accumulating in:
- proof of ID and address, which can be driving license, passport, utility bill, etc.;
- your latest contract, plus previous contracts covering 12 months’ history;
- a copy of your latest updated CV;
- three months' personal and business bank statements.
How to calculate relevant earnings for Accord contractor mortgages
First of all, you need to work out your gross annual income. For this part of the calculation, there's a hidden bonus. Unlike most contractor friendly lenders, Accord uses 52 weeks to calculate income.
But that’s not the figure they use as the base of your affordability. :( Their system uses 80% of that value to generate the ceiling of your borrowing potential .
Their algorithm then uses a multiplier of up to 5.49 for mortgage loans under £500,000. Again, that's greater than most lenders in our portfolio.
For mortgages above £500,000, that multiplier drops to 4. That's still healthy.
Credit history and existing financial commitments will also determine the income multiple.
The maths bit: an example of Accord lending criteria in numbers
If you believe Accord Mortgages is the right lender for you, here’s how to work out the size of mortgage you can afford. We’ll do it using the example of a contractor earning £400 per day, working five days a week.
In figures, our example calculation (using the × 5.49 multiplier) looks like this:
- £400 (day rate) × 5 (days worked per week) = £2,000;
- £2,000 (weekly rate) × 52 (weeks a year) = £104,000;
- £104,000 (gross annual income) × 80% (modifier) = £83,200;
- £83,200 (modified income) × 5.49 (largest multiplier) = £456,768.
Yes, you've looked at that right. A contractor earning £400/day with a good credit rating could borrow £456,768 for a mortgage.
Accord's contractor mortgage offering, overview:
Accord Mortgages are another string to Yorkshire Building Society's contractor mortgages bow. The lender has great criteria, but only goes through appointed brokers.
To qualify for an Accord contractor mortgage, you must:
- be a limited company contractor, either through a PSC or umbrella;
- earn at least £400 per day or £75,000 a year; umbrella contractors may be exempt from this threshold;
- have been contracting for at least 12 months as an independent professional;
- have two years' contracted income as an umbrella contractor earning <£400/day threshold.
In return, the lender offers you:
- access to some of the best contractor mortgage interest rates;
- use of 80% of your full annualised income as the base of your mortgage affordability;
- a multiplier of 5.49 for mortgages < £500k, one of the highest on offer anywhere;
- a respectable multiplier of 4 for mortgage loans > £500k.
Do you meet those lending criteria? Have Accord's terms impressed you as much as they have us?
If so, this newest contractor friendly lender could offer you your safest route to buying a home.
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.