Leeds BS Contractor Mortgage Lending Criteria
Leeds Building Society launched its contractor mortgage pilot programme in 2015. We were ecstatic when they asked us to play a part in that trial and subsequent rollout.
Leeds has since established itself as a key lender of mortgages that use contract rates alone. Their flexible lending criteria has played a large part in cementing that position.The building society couples that flexibility with an innovative product range. Their lending criteria is responsible, yet accessible. It considers an applicant's individual circumstances regardless of the sector they work in.
Another major benefit of Leeds' lending criteria is its tolerance of gaps between contracts. But let's not get ahead of ourselves. There are many more reasons they're on our radar; we'll look at them all, here.
Leeds mortgage products: options for contractors
Leeds Building Society lending criteria for contractors encompasses all its mortgage products. It gives contractors access to its full range of mortgage products, with the maximum LTV 85%. In non-mortgage speak, that means you need to find at last 15% deposit.
Once you find that, you'll have access to all their repayment mortgage options. This includes introductory, tracker, fixed and standard variable rate mortgages. But capital and interest isn't all Leeds offers the contracting community.
Since rollout, Leeds has increased the maximum loan-to-value (LTV) on all interest-only mortgages from 50% to 60%. That means you only need to find 40% deposit, not half of the home's value.
Likewise, the lender has increased its maximum age for residential mortgage applications from 75 to 80. This is awesome news for seasoned professionals who want to go on contracting beyond retirement.
To qualify for interest only "Part and Part" mortgages, they offer up to 75% LTV. That goes up to 60% max LTV on interest only where sale of the mortgaged property is the repayment vehicle.
Another bonus is that there are no minimum earnings requirements on Leeds' interest-only loans.
And have you got money in your savings account eroding against inflation? Why not consider an offset mortgage, pitching savings against a mortgage balance? Leeds offer offset versions of their 2–, 3– and 5–year fixed rate mortgages.
In all instances, you can put down more than the minimum deposit requirement. This will help lower the lender's risk, thus your balance and monthly payment.
As well as residential mortgages, Leeds Build Society also specialises in:
- Shared Ownership Mortgages;
- Help to Buy and Help to Buy Remortgages;
- Buy to Let and HMOs;
- Holiday Let Mortgages.
Contracting history: what Leeds will accept
The two big factors that make Leeds building society mortgages great for contractors are:
- No specific industry requirements; the lender will accept contractors from all professions;
- A maximum 6 week gap between each contract, unless there's good reason.
The first point is obvious. There are lenders out there who'll still only consider IT Contractors for mortgages. Leeds has removed the barrier of working in specific industries.
The second point's not so obvious. The industry norm is to only allow a six week break from contracting in a whole year. Leeds' underwriters will accept that gap between each contract.
That understanding flows through the rest of their acceptable contracting circumstances. Leeds accepts contractors:
- on short contracts (1-2 months), subject to at least 12 months' contract history;
- who work on multiple contracts;
- who have less than 4 weeks remaining on their contract; no need for an extension!
- with at least 12 months contracting history and at least 1 renewal/re-contract:
- this can be with the same client, but are also flexible on a case by case basis.
Income and affordability
Accepting all contractors also means Leeds doesn't expect their typical borrower to earn £80/hour. The least gross annual contract earnings they'll accept is £50k, or £217/day.
To work out how much you can afford for a mortgage, they'll use your average earnings. They'll multiply that over 46 weeks to get a ballpark amount for their calculation. *If you've worked less than 46 weeks, they'll use the actual number of weeks you've worked.
How to calculate relevant contract earnings for mortgage affordability
The first thing you need to do to work out how much you can borrow is find your annualised income.
To work that out, take your day rate and multiply it × 5 to get your weekly income. Then multiply that out by 46 (weeks) to get an annualised figure. *As mentioned above, if you've worked less than 46 weeks, use that figure instead.
The final step is to multiply your gross annual income by Leeds' multiplier. For contractors, that's 4.5. So, in summary:
- take your current contractor day rate;
- multiply it by the number of days you work per week (5);
- then multiply that by *46 (weeks);
- and finally × 4.5, Leeds' affordability multiplier.
What you'll need to support your mortgage application
As with all contractor-friendly lenders, Leeds needs certain documents to fulfil legalities. Others they need to help confirm their risk factor assessment. If you'd like a Leeds building society mortgage, you'll need to provide:
- proof of ID and address (utility bill, passport, driving license, etc.);
- your latest contract, plus previous contracts covering 12 months;
- a copy of an up-to-date CV;
- 3-months' personal and business bank statements;
- evidence of your ability to renew contracts/re-contract.
And that's about it, the full Leeds BS mortgage lending criteria. But if you do need any further mortgage advice, we're only a click or call away.
We've worked with Leeds from day one of their contractor mortgage pilot. We've worked with freelancers and contractors for over a decade. How does it go: You do the math(s)?! We look forward to your call.
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.