Mortgages for Contractors

Need a genuine contractor mortgage but tired of in-branch advisors fobbing you off? We hear you. What’s more, we can secure you a mortgage based on your contract rate alone.

"On-" or "Off-Payroll", limited company or umbrella contractor, we can help. And, in this turbulent time, everyone needs help to get the most competitive mortgage deal for their income and status.

We may even amaze you with what you can borrow based on your contract day rate:

If you’ve been to a few mainstream mortgage lenders, you’ll have worked something out, already. Few banks and building societies welcome limited company contractors with open arms.

Believe it or not, there are contractor-friendly lenders out there. Heck, chances are you’ve walked right into one already.

But here’s the thing. You won’t find underwriters who deal with payment structures like yours at branch level.

All we’re going to ask of you today is this. We’d like to present your mortgage application to one of those receptive lenders in a way we know works.Okay? Awesome; let’s do this…

Bypassing the High Street lending model

Few High Street lenders train call-centre and branch staff in contracting’s nuances. There’s no simple guide to accounting that they can keep under their counter, either.

We’re not like in branch staff or call centre operatives. They’re restricted to their own lending models and mainstream mortgage products.

Yet most mainstream lending criteria are useless for contractors, so why use them?!

Simple. We don’t.

Instead, we take the time to understand you and the way you work. We can then make your mortgage application appeal to underwriters, the decision makers.

Having a direct line to them and knowing what they look for is imperative. Without that relationship, a generic mortgage adviser’s affordability assessment would fall short.

My guess is that advisers you’ve seen already asked for volumes of accounting documents. Even when you’ve provided everything they asked for, they’ve turned you down, right?

I’m not surprised. An untrained building society or high street bank clerk has a set view of mortgage funding. They know their system, their calculation and what to look for in an applicant. Anything beyond that remit, forget it.

But, the good new is: you can put those limited company accounts away. We don’t need them. All we’re interested in is your best asset: your contract rate.

Access to High Street mortgage rates, zero payslips and accounts

We cater for all trading vehicles and payment structures for contractors. There are many, with each business model and owner status different from the next.

It doesn’t matter if you operate through your own limited company or a UK payroll umbrella. We know how to assess your relevant earnings for lending purposes.

Limited company contractor accounts and/or umbrella payslips? They’re not a true reflection of your mortgage affordability.

Your accountant gears your income for tax efficiency. That’s okay; it’s their job. But those resultant accounts don’t reflect your true disposable income.

More good news: our contract-based underwriting model disposes of the need for accounts and SA302s. Including retained profits is a more accurate way of assessing contractors' true mortgage affordability.

That may come as a surprise, given the hassle you’ve had with High Street lenders already. But we’re not going the High Street route.

Why you're better off basing mortgage affordability on a contract rate

We’ve sat around the tables with many a mortgage lender and their underwriters. Our aim? To show them how to use contract rates as the basis of a contractor’s affordability.

The accounts with which they’re familiar for assessing self-employed people are misleading. When it comes to an independent contractor, their true worth is in retained profit. Accounts and tax returns are not a true measure of what they can afford.

Some lenders ran with us (some ran away from us). Others had a chance to reflect and signed up to underwrite contractor mortgages since.

That's because through us, they can offer bespoke mortgage products for contractors.

Using your contract rate to get a bigger mortgage

It’s not that you can borrow at all that’s the headline, here. There’s even better news.

Using your contract day rate allows you to borrow a lot more for a mortgage loan. In contrast, if lenders use their standard affordability assessment criteria, you’re doomed.

They'd use your net, post-tax 'salary' plus dividend drawings to work out how much you can afford. Once an accountant's worked their magic, that 'salary' would garner a tiny mortgage offer.

Working out how much you can borrow for a bespoke contractor mortgage

To make the most of your contract rate, you need to start with your day rate. If a lender isn't onboard with this idea, treat it as a warning flag!

Here you can calculate how much you have the potential to borrow with this simple formula. If you've had derisory offers from lenders up until now, this may surprise you:

• take your current contractor day rate;
• multiply that by the number of days you work per week (lenders use the default 5 days);
• then multiply that by 46 weeks, the number of weeks per year used to calculate your annual salary;
• finally, multiply that annual gross salary by 4.5*;
  • lenders use that "multiplier" to determine your true mortgage affordability in their eyes.

Extended potential borrowing example

Let's extend that formula, using a contractor earning £500 per day, working 5 days per week. Using contract based underwriting criteria, they could borrow £516,350 to buy a home. Yep, as much as that. Here's how we work it out.

Take the £500 day rate × 5 (days worked per week) to work out a weekly wage. So, 5 × £500 = £2,500.

Then multiply that × 46, the weeks worked per year to establish a 'gross salary'. That's £2,500 × 46 = £115,000.

Finally, multiply that £115,000 × 4.49 (affordability multiplier), giving us £516,350!

*Urgent message for all contractors looking to secure mortgage finance

*Up until the pandemic, many lenders used 5 as their annualised multiplier. Since then, we've seen that figure drop, maxing at something like 4.49.

Some have slashed their affordability criteria even further, though. Nationwide, for example, has dropped its multiplier for contractor applicants to 2.

We recommend any contractor looking for a mortgage take advice before committing to buy. Assuming you can still borrow at pre-pandemic rates is a recipe for utter disappointment. You will need an established broker to present your application.

(back to example)

Documents a contractor needs to apply for a mortgage

Simplicity is at the heart of contract-based underwriting. That efficiency extends to the documents we need from you.

To present your contractor mortgage application in a way that satisfies underwriters we need copies of your:

• current contract, confirming your contract rate;
• updated CV*;
• last 3-6 months' bank statements;
• proof of ID
  • (passport, driving license or utility bills).

It is that simple.

It's taken hard work over many years to develop our strong relationships with lenders. But it's been worth it.

We've stripped down what qualifies as relevant contractor earnings for lending purposes. No accounts or payslips. We use your contract rate, which can incorporate your retained profits.

Higher risk factors brought about by COVID

*One extra criterion lenders are now scrutinising is the industry in which you work. Post-COVID mortgages now look at applicants' susceptibility to the effects of lockdown and furlough.

It's impossible to list all the different industries under consideration. But if you are contracting in an industry that's seen as high risk, take advice before applying.

It may be that you're better off delaying your application for now.

You could either swap to a new industry and get experience there before applying. Or you could stand your ground and wait until we get COVID vaccines rolled out nationwide.

Need a mortgage fast?

With so few documents involved, contract-based underwriting can speed up the mortgage process. Cutting away the excess helps when time is of the essence.

Our "no-trimmings" service, while in no way surrendering potency, reflects that speed. This means we can find the best mortgage for your status in double quick time.

If it’s a "decision-in-principle" you need, we can jump on that for you, too. It’s a great bargaining chip as well as giving you a guideline to what you can borrow.

If there are two of you in the hunt for the same house, the vendor may favour you. That’s only one advantage of a decision, or agreement, in principle.

Knowing how much you can borrow to buy a home can also help. A limit can help refine your search. An AIP can also be the ace up your sleeve if you need to get things moving fast!

Our approach to contractor mortgages takes into consideration all these eventualities.

The key factor is to ensure your mortgage broker packages your application just so. Only then will it go straight to the decision makers and bypass the front-desk staff in branch.

Our range of contractor mortgage products

Developing the base underwriting process with mortgage lenders was our opening gambit. Since then, lenders have adopted the core concept to their own ethos.

Experience told us that contractors on all rungs of the property ladder needed help. They needed access to all types of mortgage repayment vehicles.

Whether you’re a first time buyer, moving home or looking to remortgage for a better rate, we can help. Our range of contractor mortgages suits almost all personal circumstances:

• First Time Buyer: get your foot on the first step of the housing ladder;
• Moving Home: home mover mortgages can help you move up the property ladder;
• Remortgaging: save money or raise capital by switching lenders without moving house;
• Buy to Let: whether you’re new to investing or expanding your property portfolio, we can help;
• Help to Buy: use government-backed schemes for contractors with only 5% deposit;
• New Build: Getting a mortgage fast for 'Off-Plan' homes from developers;
• Bad Credit: Adverse Credit, CCJ, defaults. You’re not alone, we can help get you a mortgage.
• IT Contractors: mortgages for the chosen ones, Information Technology Professionals, are a breeze;
• Foreign Nationals: mortgages for foreign nationals on HSMP, Tier 1 and Tier 2 VISAs.

We also have mortgages to help you best manage your monthly payments:

• repayment (capital and interest), with tracker, fixed and variable rate interest;
• offset, balancing your savings against the mortgage balance;
• interest-only mortgages, many contractors’ preferred repayment vehicle.

Mortgages tailored to your specific requirements

Freelancer Financials are specialists in advising and arranging mortgages for contractors and freelancers. Our clients include, but are not limited to:

• IT Programmers to Business Analysts;
• Engineers to Telecom consultants;
• Management Consultants to Operational Risk Managers;
• Change Management to Marketing Consultants;
• Accountants, Actuaries, Architects, Surveyors, Oil & Gas Contractors, Doctors, Medics, Teachers…
• …we’re sure you get the picture.

When you approach most mortgage lenders on the High Street, you have to consider this. Their view of what qualifies as relevant earnings for lending purposes is simplistic.

In contrast, we work with lenders who understand how contractors work.

This allows us to present your application to senior underwriters direct. In turn, it ensures that they take your full earnings potential into account.

And, yes! That means they use company profits retained for tax planning purposes in that sum.

Why choose Freelancer Financials for your mortgage?

Freelancer Financials offer a clear and impartial contractor mortgage service. Forget the frustrating rejection from lenders clinging onto an out-of-date bias towards employees. You can bypass all that nonsense.

We can secure you the most competitive contractor mortgages on the market. That’s regardless of how you bill your daily or hourly rate. Regardless of your status as a limited company or an umbrella company contractor.

We know that most contractors draw a low salary and restrict dividend drawings. It’s a sound and legitimate strategy to avoid higher rate personal tax. No mortgage company should penalise you for this!

In short, the benefits of using a specialist contractor mortgage broker

We want to hear from you if any of the following appeal to you in your hunt for a competitive contractor mortgage:

• bespoke "contractor friendly" underwriting terms with several high street lenders;
• a single point of contact for your mortgage application;
• a proactive, tireless work ethic to ‘complete’ in the shortest possible time;
• mortgage application updates every step of the way;
• access to mortgage-related products, such as:
  • tailored income protection;
  • Relevant Life cover policy
  • critical illness cover.

We’ve secured thousands of mortgages for contractors over the years. They know first-hand why we’re the best and most reliable specialist mortgage broker in London. You’re more than welcome to feel the benefit of and leverage our years of experience, too.