Mortgages for contract workers, what you need to know
In today’s economic times of financial uncertainty, it’s increasingly common for employers to seek non-permanent ways of employing workers. Hence, short, fixed term and even zero hour contracts are the becoming the norm.
Great! So this type of contract allows companies to perhaps employ more workers than would otherwise be possible, but what if you wanted to buy a house? You’d want to know:-
If there are lenders in the market that accept contract and/or agency workers.
If so, how does this affect you and
What is the eligibility?
How long do I need to have been doing this line of work?
How long does the contract need to be?
How is the income calculated for mortgage purposes?
What documentation do they need to prove income?
How much can I borrow?
The answer to the first question is easy. Yes, there are lenders that will accept contract workers, but not all of them understand the way contractors are paid. However, the ones that do carry out bespoke underwriting based on the gross contract income and the career experience of the applicant. This makes applying for a mortgage much simpler than if they were treated as self-employed.
If you a contractor via you own limited company, your income will normally be assessed on the basis of your salary plus dividends and and/or net profit. However, if you carry out contract work under an umbrella company, the lender will use your PAYE income calculated on the pay rate of your gross contract.
The mortgage products and rate you can obtain on your mortgage are no different those that are available to any other employed or self-employed individuals.
Each application is individually assessed, but generally the criteria is:-
1) The applicant must be currently working on this basis and have an existing contract in place.
2) The applicant should have a track record of contracting and preferably.
3) New contractors are acceptable if they have experience in the same type of work.
4) The contract defines the income rate payable.
As well as the standard mortgage documentation, you can expect to provide a copy of your CV, your current signed contract and possibly also the agency’s contract with the contracting company.
Your home may be repossessed if you do not keep up repayments on your mortgage.