Contractors! Do You Really Need a Mortgage Broker?

Historically, getting a mortgage as a contractor has been something of a coin toss. Going back a decade, very few lenders, if any, truly understood the way that contractor payment methods worked, often leading to dead ends when applying for mortgage funding based on the value of your contract.

On the flip side, you probably know one or two people who have gone direct to a bank and got a mortgage without issue. They, however, are very much the exception to the rule, and the cost of a rejected mortgage application has never been higher.

Undoubtedly, over the past 12 months throughout the pandemic, contractors have had the short end of the stick financially. With the vast majority unable to work for large spells, meaning no billable days and no income, many have had to fall back on retained profits in limited companies, or savings accrued throughout years of contracting, in order to simply survive.

Default levels on unsecured credit have increased across the country in addition, as the financial pressures of COVID-19 have taken their toll. Add a mortgage rejection to this, and it could be fatal for your chances of securing future funding.

The truth is those contractors who have gone direct to a bank and secured a mortgage have been incredibly lucky. Choice of lender and how you present your case is vital to the successful outcome of an application. Most direct applications will undoubtedly lead to a request for any of the following:

  • Company Accounts, usually for three years
  • SA302’s from HMRC
  • Personal Bank Statements

A request for any of the above should be a huge warning sign. If a lender requests these before even looking at your contract, then they are almost certainly assessing you as self-employed. If the loan-to-value of the mortgage you need is low, or the loan amount you need is comparatively small in relation to your salary and dividends, you may be lucky. If not, a rejection will almost certainly follow.

That is where lender selection and use of a broker comes in. You may have heard in the past a suggestion to simply go to Halifax, being one of the early adopters to contractor mortgages. While Halifax may be the right choice for your circumstances, approaching direct can in itself lead to rejection, as the contractor specialist underwriters will not be the ones making a lending decision.

Using a contractor specialist broker is key, in order not only to have your application assessed on the basis of your day rate, rather than salary and dividends; but also, to access contractor exclusive rates not available direct on the high street.

At Cleerly, we have over a decade of experience of working exclusively with contractors like you and helping to overcome the obstacles that often preclude the contractor community from the mortgage market.

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