Mortgage rules relaxed for contractors | The Times
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Contract workers who have found it extremely difficult to qualify for mortgages since the credit crunch began were offered new hope today.
Halifax, the UK’s largest mortgage lender, is easing some of its restrictions for borrowers who work on a contract basis.
At the peak of the mortgage market boom in 2007, many lenders offered self-certification mortgages. They were dubbed “liar loans” because borrowers did not have to prove their income, but their original purpose was to help contractors, the self-employed and people with irregular earnings such as bonuses and commission to get onto the property ladder.
Self-certification mortgages were misused by some borrowers to inflate their income and qualify for bigger loans, and banks and building societies tightened their lending criteria when the financial crisis struck. Most require contractors to show two or three year’s accounts or tax returns in order to qualify for a mortgage.
But, Halifax is extending a scheme which it previously offered only to IT contractors to all borrowers who work on a contract basis. So long as these borrowers have a contract in place which is worth at least £500 per day or £75,000 (gross) per year and can provide proof that they have had at least one year’s experience in their particular field of contract work they will be able to apply for the bank’s standard range of mortgages.
Halifax has already begun offering this new application process through brokers and from June 1, contract workers will be able to apply with the same criteria through its branches.
John Yerou, of Freelancer Financials, a mortgage broker specialising in home loans for self-employed and contract workers, said: “This is a major milestone for the UK’s freelance community as it unbolts the contract-based mortgage market.”
Other self-employed and freelance borrowers will still have to supply three years’ tax returns.
Halifax, the UK’s largest mortgage lender, is easing some of its restrictions for borrowers who work on a contract basis.
At the peak of the mortgage market boom in 2007, many lenders offered self-certification mortgages. They were dubbed “liar loans” because borrowers did not have to prove their income, but their original purpose was to help contractors, the self-employed and people with irregular earnings such as bonuses and commission to get onto the property ladder.
Self-certification mortgages were misused by some borrowers to inflate their income and qualify for bigger loans, and banks and building societies tightened their lending criteria when the financial crisis struck. Most require contractors to show two or three year’s accounts or tax returns in order to qualify for a mortgage.
But, Halifax is extending a scheme which it previously offered only to IT contractors to all borrowers who work on a contract basis. So long as these borrowers have a contract in place which is worth at least £500 per day or £75,000 (gross) per year and can provide proof that they have had at least one year’s experience in their particular field of contract work they will be able to apply for the bank’s standard range of mortgages.
Halifax has already begun offering this new application process through brokers and from June 1, contract workers will be able to apply with the same criteria through its branches.
John Yerou, of Freelancer Financials, a mortgage broker specialising in home loans for self-employed and contract workers, said: “This is a major milestone for the UK’s freelance community as it unbolts the contract-based mortgage market.”
Other self-employed and freelance borrowers will still have to supply three years’ tax returns.
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