How to get a mortgage as a contractor?

Contracting can be a great idea; you can choose when and where you work, enjoy a flexible lifestyle and can switch between contracts to suit your needs.

However, when it comes to getting a mortgage, the very idea of flexibility and potential lack of structure will mean many mortgage companies won’t even entertain you, irrespective of whether you can actually afford it.

It’s not all doom and gloom, here a few handy hints to help you.

Use a specialist

Many banks and high street mortgage providers don’t necessarily understand how contracting works and usually their requirements are not flexible enough to accommodate them. Therefore, look for a mortgage broker who specialises in working with contractors, freelancers and the self-employed. This should save you time and effort in terms of finding a lender who will be suitable to your circumstances as a contractor.

The higher the deposit, the lower the risk

The bigger the deposit you put down, the lower the risk the mortgage lender is taking. A larger deposit also means you can benefit from lower interest rates and consequentially, monthly payments are lower.

Keep a good credit rating

Goes without saying but a poor credit rating may mean that regardless of how big a deposit you have, you will not be able to secure a mortgage and your application will be rejected.  Ensure you plan many months in advance to get all your finances in order, ensure you make all payments on time and check your credit file regularly.

Avoid breaks in contracting

One of the attractions in contracting is the ability to take extended time off. However, if you have more than eight weeks a year away from contracting, this can impact your ability to secure a mortgage.  While it’s tempting to take time off, if you are planning to buy a house in the near future, ensure you don’t have breaks and preferably, keep within the same contract.

Keep your contract up to date

Ensuring your contract is up to date and includes evidence of the contract length and rate, will certainly help your mortgage application.

Know what you can afford

Make sure you understand what you can afford. Depending on the risk, there is a chance that your mortgage lender will offer you a mortgage with higher repayments. Don’t forget as well, interest rates can go up and put even more pressure on the mortgage repayments when you’re on a variable rate.

Posted by Beth Hogg