There are many factors that contribute to whether you are eligible or not for a contractor mortgage, but yes, you can get a mortgage if you are a contractor. Just because you are a contractor does not disqualify you for a mortgage by a lender. The only important factor is the lender should understand the contract thoroughly. However, if you have a poor credit history or a bad debt payment record, it becomes difficult for you to secure a mortgage loan as a contractor. You also have to consider that whether you are going to move around for your work or just get relocated to a place for a long time.
FAQs about contractor mortgages
Am I eligible for a mortgage from a high street lender?
Agree or not, but it is not easy, once you approach a high street lender, he will always pose challenges regarding how income will reach the contractor. Though they understand dividends, contractors who have a good tax history and draw a fair amount of salary and dividends won’t look very attractive to lenders. The primary reason behind this is the fact that even if their net income averaged for previous two years reaches five figures that would still look low to lenders.
Avoid formalizing anything with the lenders, because once they get into credit check and they found something awkward, things will be more difficult for you. Try to take a mortgage from lenders who have a good lending mandate in the past and who possess knowledge about contractors.
Is it necessary to have company accounts?
This is a pure myth; many contractors feel that they need three years’ of accounts when they seek out for a mortgage, but this not true anymore. You can easily get a contractor mortgage without three years’ company accounts; there is only one requirement that they have to meet, i.e., they should not be new to contracting profession. Thus lenders include a copy of contractor’s contract which indicates whether the contractor is competent enough along with a copy of CV that indicates their expertise and earning potential.
If you are new but you still have a CV with decent employment record, it will suffice as proof that you have the earning potential and lender will approve you for the mortgage.
Am I eligible for a competitive interest rate?
Yes, you are eligible for the same sort of rates as other employees and in some cases, even more. Though the usual trend is that contractors are eligible for a lesser rate of interest since contractors are less risky than other lending groups and they benefit more from a higher interest rate, hence there is no doubt that as a contractor you too, are eligible for competitive interest rates.