Contractor mortgage-hopefuls don’t need three years’ accounts
Lenders are inherently more wary of any borrower who is not a permanent employee with 3 months’ payslips and so will usually demand to see a three-year trading history.
Contractors’ borrowing power
This can present a problem for many contractors, either because you haven’t been contracting for long enough or because legitimate tax-saving measures that you may be taking advantage of are limiting the income that your accounts will show. This can have a serious impact on the amount that you can borrow if you approach a lender directly, yourself. But in fact, it needn’t stop contractors from achieving their goals of home ownership. In spite of the reported findings, there is a way for you to borrow as much as – or in some cases even more than, your ‘permie’ colleagues, and at the same interest rates.
How to get round the 3-year rule
We have worked with lenders over the past 12 years to negotiate underwriting for contractors which enable you to arrange your mortgage based simply on a multiple of your annualised contract rate.
This allows you to bypass the usual problem of trading history and complex income as you won’t have to produce the three years’ accounts that the lender will often insist on if you approach them direct. You therefore won’t be penalised for any tax saving measures, such as contributions to a pension, because your take-home pay is not all that’s considered in a contractor mortgage application.
Underwriters who understand contracting
You shouldn’t ever have to pay a fee for mortgage advice. However it’s always worth checking before you proceed with a firm, as some brokers will try to charge for their service in addition to receiving an introducer’s commission from a lender.
Having an experienced team on your side can make all the difference to your chances of securing a mortgage and should help you to complete on your dream home in this difficult market, all without the need for those three years accounts.
The author, ContractorMoney, is an independent financial advisers that specialises in helping contractors on or up the property ladder with mortgages based on contract rate alone.