MMR - Getting a mortgage whilst on the bench?

[Mark McBurney@CMME]

Have you ever had your contract cut out from under you when the project suddenly comes to an unexpected end? Do you always know where the road lies?

Gosh, I wish I had known the mortgage way and had a crystal ball in senior managers office. I'd love to be the first... sheesh

Hi RocktronAMP,

It was actually me that you spoke with last week, funnily enough!

Apologies if I've not explained myself in the best possible way, as you can imagine it's not easy to convey sometimes the lender point of view in this sort of instance.

Unfortunately as it stands at present, the only way to prove any sort of income through an umbrella company is by way of your contract, which means that we'd need to wait until you've secured the new one. If you were a LtdCo director then in theory you may have been able to prove income by way of salary/dividends/net profit, however as an umbrella contractor this isn't possible.

More than happy to help when you've secured the next contract, or if you'd just like to chat about it some more?

Best wishes

Mark

[TykeMerc]

Have you ever had your contract cut out from under you when the project suddenly comes to an unexpected end? Do you always know where the road lies?

Gosh, I wish I had known the mortgage way and had a crystal ball in senior managers office. I'd love to be the first... sheesh

That's just unfortunate timing, sadly when it comes to mortgages proving an income is pretty important.

[rocktronAMP]

Hi RocktronAMP,

It was actually me that you spoke with last week, funnily enough!

Apologies if I've not explained myself in the best possible way, as you can imagine it's not easy to convey sometimes the lender point of view in this sort of instance.

Unfortunately as it stands at present, the only way to prove any sort of income through an umbrella company is by way of your contract, which means that we'd need to wait until you've secured the new one. If you were a LtdCo director then in theory you may have been able to prove income by way of salary/dividends/net profit, however as an umbrella contractor this isn't possible.

More than happy to help when you've secured the next contract, or if you'd just like to chat about it some more?

Best wishes

Mark

Yes we know of each other

I am interviewing today. I hope I will get a lot more this week. I started pushing the job boards last week. With some luck I hope to secure something aqap.

In theory a limited company would need 3 years of accounts, but like you said, they still will need a current contract. It makes me think that beginning contracting is not good for somebody if they are planning to request a mortgage within a year or two, especially since the new MMR rules went into effect in April 2014. It does not matter whether they are LTD or Umbrella with this opinion ... Obviously longer contracts are better, 6 months is better than 3 months, but as others have said, contractors are a temporary resource, which I have always known, and sometimes the client's projects and budgets do not work out for the duration. In conclusion, the planets have to line up for contractors at the time of applying for mortgage ... how great and how divine!

[Mark McBurney@CMME]

In theory a limited company would need 3 years of accounts, but like you said, they still will need a current contract. It makes me think that beginning contracting is not good for somebody if they are planning to request a mortgage within a year or two, especially since the new MMR rules went into effect in April 2014. It does not matter whether they are LTD or Umbrella with this opinion ... Obviously longer contracts are better, 6 months is better than 3 months, but as others have said, contractors are a temporary resource, which I have always known, and sometimes the client's projects and budgets do not work out for the duration. In conclusion, the planets have to line up for contractors at the time of applying for mortgage ... how great and how divine!

Good luck with the job search.

In reference to the last paragraph, it's a bit of a mixed response from lenders really, the best possible way to prove income as a contractor (unless you're a LtdCo director and draw most of the profit out as personal income) is to use the contract rate. If there isn't a current contract then potentially you could use 1 or 2yrs LtdCo accounts and use Salary/Dividends/Profit, however that's likely going to impact on affordability and mortgage potential due to the probable disparity between contract rate, i.e. turnover, and personal drawings.

Unfortunately as an Umbrella contractor you sort of fall into the grey area in the middle whereby there is only one way to prove income, and that is from a contract, since you can't use historical income on that basis.

Look forward to speaking with you when things develop.

Best wishes.

Mark

[d000hg]

I was considering something similar the other day. Our fixed-term lock in is due to expire at the start of 2015 and my current contract runs until the end of 2014. That means I could find myself benched at exactly the wrong time, 'trapped' in a much more expensive mortgage.

In that scenario would company accounts and SA302 paint a nice picture? I seem to recall our IFA had 3 different options and only one of them was a "contractor mortgage" asking for my day-rate.

Anyone?

[Mark McBurney@CMME]

Anyone?

Sorry d000hg, I missed this!

That could well work assuming that the mortgage is affordable when assessing your income as your drawings from the Limited Company?

[jmo21]

Anyone?

For what it's worth, when I did it, my bank was happy with SA302's for last 3 years - we were looking at porting our existing mortgage.

I also engaged a broker (contractor focused) and he wanted 3 years accounts, copy of current contract to confirm rate and end date.

[d000hg]

For what it's worth, when I did it, my bank was happy with SA302's for last 3 years - we were looking at porting our existing mortgage.

I also engaged a broker (contractor focused) and he wanted 3 years accounts, copy of current contract to confirm rate and end date.

Did the bank also want proof you were currently in contract, or just proof you had been doing well the 3 previous years?

[jmo21]

Did the bank also want proof you were currently in contract, or just proof you had been doing well the 3 previous years?

no, just the SA302's

Different banks will have different needs though I guess.

[Mark McBurney@CMME]

Did the bank also want proof you were currently in contract, or just proof you had been doing well the 3 previous years?

Hi d000hg,

I think you're confusing two different ways of assessing income; if a lender is assessing on the basis of a contract rate, they will not look at income through the LtdCo at all. If they're looking at your LtdCo income by way of accounts and/or SA302's, a contract is irrelevant as they're assessing you as a self-employed company director.

Hope that helps.

Thanks

Mark