Virgin Money Contractor Mortgage Lending Criteria

Virgin Money, the former Northern Rock, has offered contractor mortgages for several years. Moreover, their interest rates are regular occupiers of top spots in best buy tables.

However, Virgin’s lending policy toward contractors has, more recently, become unnervingly complicated. Here’s the gen:

Table of Contents

This articles looks at:

• Previous Virgin Lending Criteria (Comparison);
• Current Virgin Lending Criteria (Overview);
• Contractor Mortgage Lending Criteria for a 12-Month Contract;
• Contractor Mortgage Criteria for a 6-Month Contract;
• Mortgages tailored for Umbrella Company Contractors?;
• Umbrella Payslip update, September 2020;
• Biting their nose to spite their face?;
• There is a loophole, a tiny one;
• Update: lending criteria May, 2016.

Previous Virgin Criteria, for Comparison

Virgin once offered limited company contractors mortgages based on their contract rate alone. No need for two years’ accounts and all the associated trappings and documentation.

Virgin Money’s lending criteria did ask for two years’ contracting history as the minimum. Yet we often secured ‘exceptions’ by leveraging our relationships with Virgin’s senior underwriters.

That’s all changed since the bank took a long hard look at its mortgage loans. Getting a contractor mortgage with Virgin Money is far from impossible. But they do now use more stringent guidelines when appraising an applicant’s affordability.

Current Virgin Money Mortgage Lending Criteria Broken Down

The complications don’t end there. The revised Virgin mortgage lending criteria isn’t a constant. It changes depending upon the type of current contract you’re on.

There’s one list of requirements you must meet if you’re on a 6-month contract. Then there’s a different set of criteria targeting those on 12-month contracts.

Following us so far? Well, we’re glad you are:

Contractor Mortgage Lending Criteria for a 12-Month Contract:

• your current contract must have at least 6 months remaining to run;
  • failing that, you need to supply evidence of new/renewed 12 month contract, and:
• you must provide your previous contract, which must show a term of 12 months, and:
• your CV must prove continued employment, i.e., no more than a 2 month gap between contracts;
• Virgin calculates your annualised income for lending purposes thus: ([Daily £ Rate x 5] x 46).

Contractor Mortgage Criteria for a 6-Month Contract:

• your current contract must have at least 3 months remaining to run;
  • failing that, you need to supply evidence of new/renewed 6 month contract, and:
• you must prove 24 months continuous employment with no more than a 2 month gap between contracts;
• your CV must prove continued employment, i.e., no more than a 2 month gap between contracts;
• Virgin calculates your annualised income for lending purposes thus: ([Daily £ Rate x 5] x 46).

Mortgages tailored for Umbrella Company Contractors?

The policies above work well enough for contractors operating through an Umbrella Company. But for contractors trading through a Limited Company, the criteria becomes less flexible. And, I hasten to add, yet more complicated. Let me explain.

Virgin will assess you on your gross annual contract earnings. Let’s get that straight, at least.

Umbrella Payslip update, September 2020

Virgin Money is no longer assessing umbrella contractors on their gross contract earnings. They will only work out your affordability from your Umbrella payslip.

Due to inconsistencies with traditional PAYE payslips, this could cause issues. Not all in-house advisors will understand the additional deductions and relief on those documents.

If you’re concerned that your Umbrella payslip doesn’t reflect your income, talk to us. We can submit your application in a way that highlights your true mortgage affordability.

(original article cont’d)

Unlike other lenders, you need to have been contracting for at least 24 months to qualify.

Now this is where Virgin’s criteria takes a turn for the worse.

Biting their nose to spite their face?

Say you’ve got 2 years’ trading accounts, which you will have if you fall into their 6-month bracket. The underwriters will use those accounts instead and overrule their own contractor policy.

It’s hard to believe, but it’s true. They then resort to traditional forms of income assessment using your trading accounts.

In theory, the only way you qualify using your contract rate is if you’re on a 12-month contract.

The risk assessment group who drafted this policy must have been drinking Vodka shots at the time.

There is a loophole, a tiny one, but it’s there…

There is a way Virgin Money’s policy can work for Limited Company contractors. That’s if they’ve spent over 2 years contracting, but not all through a Limited Company!

How can you reach that scenario? If you’ve switched from Umbrella to Limited Company payment structure in the last 2 years.

If you’ve worked two years through a limited company, Virgin won’t assess you on your contract.

Instead, they’ll use your accounts as the basis of your mortgage affordability. Which, we all know, may not reflect your contract earnings in the best light.

Update: Virgin Money lending limited company contractor lending criteria May, 2016

We have awesome news about the way Virgin Money will assess contractors, moving forward. The team are reviewing their lending policy based on our feedback!

The top and bottom of it is this. They’re simplifying the criteria for assessing limited company contractors’ mortgage affordability. Their new criteria will at least mirror the way they assess Umbrella contractors.

It’s a move back in the right direction. We hope it will see Virgin Money regain their status as a go-to mortgage source for contractors.

As soon as the review is complete, we’ll update our guide here to reflect those changes. Watch this space…

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.

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