Nationwide Building Society Contractor Mortgage Lending Criteria
Nationwide Building Society is working hard to give contractors realistic mortgage options. They’re offering contractors who don’t meet other lenders’ stringent lending criteria real choice.
For many years, we’ve been helping independent professionals get on the property ladder. Until recently, that’s meant either working in specific industries or meeting high income thresholds.Nationwide’s contractor mortgage lending criteria has thrown that tradition out the window. There’s no longer the need to work in IT or Oil & Gas. Contractors no longer have to earn ‘x’ amount per day to qualify against the new criteria.
Here’s what it means for contractors who’ve failed to get contract-based mortgages before now.
Flexible lending criteria for the modern contractor
Nationwide lending criteria are generous beyond having no stipulation on industry and income. For contractors on modest income, the building society is becoming the new go-to lender.
Also, most contractor-friendly lenders don’t like gaps between contracts exceeding six weeks a year. With Nationwide, it’s double that. Their criteria allows for up to 12 weeks a year not contracting.
Even then, if an applicant has been contracting for many years, they can be flexible on this point.
Another flexible aspect that scores Nationwide points is the time they ask for left to run on a contract. Many lenders who provide genuine contractor mortgages demand at least 4-6 weeks. Some may even ask for an extension beyond that run-out period.
Nationwide doesn’t insist on a minimum run out, per se. But they do need to make sure that each mortgage application is plausible.
If you do have only a short term left to run, the mortgage lender will consider other aspects. In this instance, they may look at:
- how long you’ve been doing this type of work;
- what the demand is for your particular skill;
- if you’ve had previous contract renewals in the same line of work.
Despite this flexibility, the building society must still abide by FCA guidelines. To ensure they do, here’s what they need from us as the mortgage broker and you as the applicant:
From Nationwide to industry-wide: what you need to get a mortgage
To get a mortgage with Nationwide you must have been contracting for at least 12 months. On top of that, it must have been in a similar industry. This is to ensure that you are a plausible candidate for contract-based underwriting.
You must also provide minimal documentation to back up your application. Again, evidence of income that Nationwide asks for is less stringent than other lenders:
- proof of ID and address, which can be driving license, passport, utility bill, etc.;
- your latest contract, plus previous contracts covering 12 months’ history;
- unlike other lenders, the criteria doesn’t insist upon a CV;
- the lender asks for no business bank statements;
- instead, they ask for just one month’s personal bank statement.
As we alluded earlier, you must also have worked 40 weeks of the year running up to the application. If you have good reason for not meeting that criterion, the lender may consider a waiver.
Talk to us; we’re human
The best thing you can do if this is your situation is talk to your mortgage broker. A good one will know in an instant what the right next move is for you.
With us, you’ll get a mortgage advisor who’ll be with you from application to completion. That goes without saying, whatever your circumstances.
It’s important that we understand both you and your business from day one. This ensures we match your situation and affordability status with the right lender.
Discuss the mortgage term you’re looking for. How much deposit do you have to play with? The more you can put down, the better the rate of interest you’ll achieve on your mortgage.
Also, consider your sources of income. Is it just contracting funding the purchase of your new home? Or do you have other sources, such as a pension or rental income?
Our experienced advisors deal with all our lenders day in, day out. Be honest with them if you foresee any complications. The more we know about you, the better the service we can provide.
How to calculate relevant earnings for a Nationwide contractor mortgage
If you think Nationwide is the right option 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 £250 per day, working five days a week.
First of all, you need to workout gross annual income. Unlike other lenders, Nationwide uses a full 52 weeks for this part of the calculation.
But that’s not the figure they use as the base of your affordability. What their system does is use 80% of that estimate instead.
The sum then uses a multiplier of either 4.5 or 5 to generate the ceiling of your borrowing potential. Credit history and existing financial commitments will determine which of those they use.
In figures, our example calculation (using the × 5 multiplier) looks like this:
- £250 (day rate) × 5 (days worked per week) = £1,250;
- £1,250 (weekly rate) × 52 (weeks a year) = £65,000;
- £65,000 (gross annual income) × 80% (modifier) = £52,000;
- £52,000 (modified income) × 5 (largest multiplier) = £260,000.
So, a contractor on £250/day with a good credit rating could borrow £260,000 for a mortgage.
The building society has looked at the problems contractors face in depth. Their lending criteria shows a solid understanding of those issues, and provides answers.
As a limited company contractor on modest income, contractor mortgages are now within reach. If you’ve failed to qualify in the past, Nationwide may well be the solution you’re looking for.
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.