Halifax Contractor Mortgage Lending Criteria
The Halifax Bank set the tone for contractor mortgages as we know them today. They were the first to use daily rates to determine how much contractors could afford to borrow.
This precedent unshackled contractors from the prior necessity of proving historical income. That was over a decade ago. Today, the bank continues to lead the market in affordable mortgages for contractors.
During the early years, their lending policy was only available to IT contractors. Any non-IT contractors had to provide a minimum of one years’ accounts. On that basis, the bank assessed affordability using salary and dividend drawings.
In May 2013, Halifax lowered that barrier to entry, widening their scope beyond the IT sector. Now, they offer contract-based mortgage underwriting to contractors in any niche sector.
Halifax lending policy is one of the most flexible towards contractors today. Even those new to contracting without prior accounts can access mortgage loans.
Why is the Halifax such a good choice for contractors?
Halifax will accept contractors’ applications from their first contract. But there is a small caveat for mortgage lending against this criterion.
The contractor must have been working in the same line of work (uninterrupted) for at least two years. Introducing this step safeguards both parties as the experience exhibited in the field:
- adds a layer of security for the bank’s investment;
- gives the contractor confidence that they can meet the mortgage repayment over the term.
Another defining element is the speed with which the Halifax processes mortgage applications. We cannot overstate the importance of this asset.
In today’s dynamic market, borrowers come under immense pressure to secure a lender’s offer. Once secured, pace then dictates that they complete in as swift a time frame as possible.
The backing of a lender that can respond to these pressures is essential for all parties involved.
A little extra help
If the Halifax sounds like the lender you want to work with, then great, we can help. Here’s what we need as your mortgage broker to enable them to process your application:
- Halifax will accept the gross value of your current contract as evidence of income;
- Halifax lending criteria doesn’t ask for any minimum daily rate for IT contractors;
- Non-IT contractors must earn at least £312.50 per day;
- Contractors on their first contract must have history in the same profession for at least 2 years;
- At the time of application, the borrower must have at least 4-6 weeks left to run on their contract. If not, they must provide evidence of a contract renewal/extension;
- An up-to-date CV is mandatory, outlining your employment and contracting history;
- Halifax underwriters don’t like to see more than a 6-week gap between contracts;
- Gross annual income (for lending purposes) calculated as Daily Rate x 5 (days) x 48 (weeks).
Only have 5% deposit? Contractors can access Help-to-Buy too
Here’s one final option if you only have a small deposit. The Halifax is one of the lenders backing the government’s Help-to-Buy mortgage scheme.
This scheme offers a government-backed 95% LTV mortgage to anyone, including contractors. The mortgage rates might not be the most competitive. But if your credit rating’s great and you can only raise 5% deposit, it’s an option.
This type of low-deposit mortgage loan also comes with some important small print.
You can not own any other property to qualify for this government-backed scheme. Nor can you have an interest in any other property, anywhere in the world.
As with all Help-to-Buy Schemes the property you want to buy must not exceed £600,000. It must also be at least two years old, not a new-build. That’s because Halifax offers the ‘mortgage guarantee’ H2B scheme, not the equity loan.
Author: John Yerou
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.