Principality Building Society contractor mortgage lending criteria
Principality Building Society has broadened its lending criteria to accommodate contractors of all types more readily.
Today, day rate contractors, fixed-term contractors, umbrella contractors, locums, CIS workers, agency workers and zero-hour contractors can apply for a mortgage with the lender.
These are Principality’s mortgage lending criteria, which are dependent on contractors’ different payment structures.
Day-rate contractors inside or outside IR35 - umbrella payroll or limited company
Day-rate contractors who apply for a mortgage with Principality Building Society must earn at least £50k per annum (£210/day).
Their current contract must reflect this level of income. If the contract satisfies these criteria, the annualisation calculation for affordability purposes is:
- Day rate (£) x 5 days (per week) x 48 weeks (per year)
If the contractor works fewer days per week, the annualisation calculation will reflect those shorter hours.
Criteria for fixed-term contractors
Principality accepts contractors working on fixed-term contracts. The contract must be for a duration of 12 months, and should have at least six months left to run. The lender does offer a certain amount of flexibility on this last criterion if the applicant merits it.
As with day-rate contractors, the Principality accepts applications from all industry sectors. But there is no minimum income requirement for fixed-term contractors. And, instead of using a contract to verify income, the lender will ask for the last three months’ payslips.
Criteria for locums
The Principality looks at locums in two distinct ways. For medical doctors, underwriters will annualise income using an average of the last three months’ invoices or remittance slips.
They will individually appraise pharmacists’ and dentists’ applications on a case-by-case basis. This type of manual underwriting will ensure the applicant can genuinely afford any subsequent mortgage offer.
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Contracting history
Principality BS has few restrictions on which industry a day-rate contractor works in., but contractors must have at least two years' experience in the same industry sector they are currently working within. However, this can include PAYE employee history in part, or wholly. That means there's no minimum contracting history, so day-one contractors can also apply.
Gaps between contracts
Principality doesn't like to see gaps between contracts of more than 6-8 weeks. However, underwriters appreciate that life happens. So if there's a good reason for a longer gap, they can be flexible.
Time remaining on contract at application
As well as the contract evidencing income, it must have at least 4-6 weeks left to run at time of application. If not, the applicant must obtain a contract extension or renewal to show future income continuity.
Adverse credit
The Principality has a generous attitude towards (slight) adverse credit. On CCJS or defaults, underwriters will accept up to £500 in value within the last six years. They'll even consider applications where the applicant has one or two missed payments within the last two years.
CIS workers (Construction Industry Scheme)
Principality treats Construction Industry Scheme (CIS) contractors as self-employed. That means underwriters will assess CIS contractors' affordability using their most recent set of accounts. Applicants must be able to provide at least one year’s self-assessment, SA302 or verified and signed-off accounts.
Zero-hours contract workers
Principality’s underwriters will consider zero-hours applicants, but from a narrow range of industry sectors. Contractors working in education, the NHS and the healthcare sectors can apply.
Bank nurses and supply teachers need to provide six months’ proof of income to support their applications. But again, underwriters appraise qualifying zero-hours contractors on a case-by-case basis. This gives them a certain amount of flexibility when assessing this sector’s applications.
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Why choose Principality Building Society
In a nutshell
Principality Building Society has more than 160 years’ experience providing mortgages. Its updated policies show a determination to move with the times.
That the lender uses 48 weeks for its annualisation calculation, accepts day-one contractors and offers a generous allowance for adverse credit makes it a viable option for contractors with more complex backgrounds.
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