Introduction
Navigating the world of mortgages can be daunting for anyone, but it can be particularly tricky for contractors. Traditional lenders often struggle to understand the unique financial situations of contractors which can result in mortgage application rejections. However, the rise of specialist lenders has made the process of acquiring mortgages for contractors easier. By understanding the process and knowing what to look for, contractors can secure the right mortgage for their circumstances.
The Challenge of Obtaining Mortgages for Contractors
Historically, contractors have faced significant challenges when applying for mortgages. Traditional lenders often base their decisions on salary and PAYE income, which does not accurately reflect a contractor’s earning potential. They may also require years of accounts and often overlook the fact that contractors work on a project-to-project basis, making income less predictable. In addition, they may not see the contractor’s entire income, such as dividends and retained profits, which can limit the mortgage amount offered.
Solutions for Contractors Seeking Mortgages
Fortunately, there are now specialist lenders and brokers who understand the unique circumstances of contractors. These providers consider the whole income of the contractor including dividends and retained profits. They also understand that contractors may not have years of accounts and are comfortable assessing affordability based on the contract rate. Some even offer contractor-specific products, including mortgages for contractors with only a short trading history or those working through a limited company.
Tips for Contractors Applying for Mortgages
When applying for mortgages for contractors, it’s important to be prepared and to present your financial situation in the best light. Ensure your accounts are up-to-date and clearly show your income. Consider using a specialist broker who understands the needs of contractors and can guide you to the right lender. Keep a healthy deposit as it can increase your borrowing power and make you a more attractive prospect to lenders. Lastly, maintain a good credit score as it’s a key factor that lenders consider when approving a mortgage.
Conclusion
While obtaining mortgages for contractors can be a complex process, it is not impossible. By understanding the challenges, knowing the solutions, and being prepared, contractors can navigate the mortgage process and secure a suitable mortgage. By partnering with the right lender or broker, contractors can turn the dream of owning their own home into a reality.