Contractor life is synonymous with flexibility and variety, the very aspects that often set it apart from the traditional nine-to-fivers. But when it comes to settling down and planting roots, the very same career features may introduce a layer of complexity when seeking a mortgage. Here we will clarify how contractors can secure the best mortgage rates in a market that is increasingly recognising and serving their specific needs
Contractors and Mortgages: A New Era
Traditionally, the mortgage market has leaned towards full-time employees with a steady stream of income, usually backed by years of service with a single employer or business. However, due to the changing nature of work, contractors are finding themselves more easily accommodated in the mortgage market than in the past. This shift is attributed to a realisation among lenders that the contractor segment is not only growing but often represents reliable, high-earning professionals where long-term affordability for a mortgage is not as much of an issue as their lending policies have implied.
The Cleerly Advantage
Understanding the Rate Game
Are contractors subject to higher mortgage rates than regular employees? The answer, with a few caveats, is increasingly 'no.' The rates at which a contractor can qualify are determined by several factors, including deposit size, credit history, the type and term and the term of the mortgage, much like any other applicant. In fact, with the right guidance, contractors are finding they can access the same rates as permanent employees if they plan their preparation for the mortgage application effectively.
Contract Clarity
Perhaps the greatest differentiator for contractors is how their income is assessed by lenders. Rather than relying on payslips or tax returns, contractors' mortgage suitability is more directly correlated with the terms of their contracts. A robust contract that can unequivocally demonstrate a sustainable income, accompanies by a CV that proves skills and experience in the contracting sector, is the foundation of a successful mortgage application.
Navigating the Lender Landscape
While it is true that some lenders are still cautious when it comes to contractors, the number of financial institutions offering mortgage products to this group has grown significantly. It's a matter of understanding your options and working with a mortgage specialist who appreciates the nuances of contractor income and can match you with a lender who is most likely to offer you a competitive rate.
Building the Deposit Triangle
Deposit size is a key lever for any mortgage applicant, and contractors are no exception. The larger the deposit, the more favourably the lender is likely to view the application, translating into lower interest rates and potentially saving a significant amount over the life of the mortgage. A larger deposit can also unlock types of mortgage that were not previously available at high ‘loan to value’ ratios. Offset mortgages are an example of this, where you can park your savings in a linked bank account to effectively reduce your mortgage interest.
Expert advice
Cleerly have been arranging mortgages for contractors for years, with a focus on lender engagement to manage perception of risk before any application is submitted. Cleerly’s contractor specialists are adept at navigating the fine print and intricacies of contracting when it comes to managing lenders. Their understanding of the contractor segment enables them to secure the best possible rates for their clients, underscoring the value of seeking expert advice. They will also monitor the market to ensure the best mortgage rates are available when an application is needed.
The Contractor Specialist Consultant
A mortgage consultant specialising in contractor affairs can be invaluable in not only securing a mortgage with reasonable terms but in also ensuring the process runs as smoothly as possible. With up-to-the-minute market knowledge and a client-first approach, Cleerly’s experts can be the bridge to a suitable and stress-free outcome. They can also help you to manage estate agents’ questions about your ability to make an offer on a property by reassuring them that the finances have been checked and a mortgage is achievable.
The best rates for your situation
For contractors eyeing that perfect property, the path to a competitive mortgage may not be as convoluted as once thought. With a growing awareness among lenders and the arsenal of knowledge and expertise at your disposal, the firm barriers that were once in place are now mere hurdles to jump on your way to a mortgage offer. Remember, preparation and understanding your unique position are the keys to unlocking the door that leads to your dream home.
In the world of mortgages, as with contracting itself, adaptability and knowledge are the cornerstones of success. The right mortgage at the right rate is not a pipe dream; it's a tangible reality that is well within reach. For contractors, the mortgage market is evolving, and with it, opportunities are burgeoning. It's an exciting time to be a contractor looking to invest in bricks and mortar.
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