What To Look for in the Right Contractor Mortgage Broker
Navigating the mortgage market can be a challenging place for most people, but especially for contractors. Working with a contractor mortgage specialist is invaluable for contractors looking to obtain a mortgage as they have a deep understanding of lending criteria and range of different ways of evidencing income – something we explain later in this blog.
Understanding Contractor Mortgages
Navigating the mortgage landscape can be particularly challenging for contractors, freelancers, and self-employed professionals. Traditional mortgages often rely on steady, predictable income, which doesn’t align with the financial realities of contract-based work.
This is where contractor mortgages come into play.
Designed specifically for those with irregular income patterns, contractor mortgages offer a more flexible and accessible route to homeownership. By considering contract earnings as proof of income, these mortgages cater to the unique financial circumstances of contractors, ensuring you have viable options in the housing market.
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Recap: What is a Contractor Mortgage?
A contractor mortgage is tailored to meet the needs of contractors, freelancers, and self-employed individuals. Unlike traditional mortgages that depend heavily on consistent income and standard employment verification, contractor mortgages take into account the variable nature of contract earnings. This means that instead of relying on tax returns lenders assess your income based on your gross contract rate. This approach provides a more accurate reflection of your earning potential, making it easier to secure a mortgage that fits your financial situation.
Why Do Contractors Need a Specialist Mortgage Broker
There are a number of reasons why Contractors should seek assistance from a contractor broker, the main one being that contractor brokers will evidence your income using the correct calculation which usually allows you to borrow far more than via the traditional routes of using self-employed earnings (for limited company contractors) or basic income shown on a payslip (for umbrella contractors).
Contractor friendly lenders play a crucial role as they understand the unique financial situations of contractors and can offer more flexible lending criteria.
Using a contractor broker will give you access to a range of products from across the market, typically it’s the same lenders as any other traditional broker will use, It’s simply a different way of evidencing income.
We work with lenders closely which allow us to tailor the mortgage to meet the client’s needs and circumstances. Some lenders allow for flexible criteria and use common sense lending, as opposed to black and white lending criteria you may find on the high-street. We also have access to a number of specialist lenders which clients some of whom clients may not be familiar with or have heard of, but can approve some situations where the bigger lenders may not.
1.? Experience and Expertise in Contractor Mortgages
Something all contractor mortgage brokers should have is experience and expertise. Experience is worth its weight in gold when working with any mortgage broker, certainly contractor brokers. With experience comes relationships across the market, which is something we have given we’ve been working with contractors for over 8 years. We have relationships with some lenders where they can approve some mortgages where other lenders won’t. We can sometimes even get mortgages approved when it’s outside of those lenders normal lending criteria, providing there’s a strong case behind it.
Working with genuine contractor mortgage lenders ensures that contractors can secure appropriate mortgage options based on their unique income situations.
It’s also very important that a contractor broker understands the way contractors operate and why they work in this way. For instance, with an Umbrella contractor it’s important for a broker to understand what an umbrella company is, how they remunerate their ‘employees’ and what to look out for in the payslips – as often there will be a number of incomes shown on the payslip such as bonus, commission or additional pay. With a Limited Company contractor, it’s important for the broker to understand why the taxable earnings are generally lower and how to position this to the correct lender.
“They are experts in their field and truly are the best brokerage I have come across, I would highly recommend them to anyone in need of a mortgage.”
Trustpilot review, Dec 2024
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2.???? Access to a Wide Range of Lenders?
All mortgage brokers should have access to a wide range of different lenders. As for us, we currently have over 100 different lenders we can approach, all of which will have different lending criteria, processes and interest rates on offer. A contractor broker is no different and although it is more challenging to get a mortgage as a contractor, there are still a lot of different lenders who can consider them. Contractor friendly mortgage lenders offer personalised services and flexibility, making them ideal for contractors. Over the years, lenders have become more risk averse to lending to contractors which is great for people working on a contract – and great for us!
Although they are far more accessible now, there are still some lenders who will not consider a contractor and simply do not understand how they operate – this includes some big high-street names who won’t consider lending based on a gross day or hourly rate. Most contractors should have a number of different options available to them, which would result in the broker ensuring that the contractor is getting the most competitive product that meets their needs and circumstances.
2.???? Transparency in Fees and Services
Due to the specialist nature of contractor lending, you’ll typically find brokers working in the contractor space will charge a broker fee for the work they do on your behalf. All brokers, contractor specialist or not, should make it very clear as to whether they charge a fee for their work, how much is charged, when it is due and finally under what circumstances their fee is refunded (if at all). The level of fee being charged will vary depending on the company you are choosing to use, and some brokers may charge a percentage based fee as opposed to a flat amount.
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3.???? Tailored Mortgage Advice
Contractors can often feel penalised when looking at mortgage options, particularly if they are working with more traditional brokers or lenders. It’s easy to feel that some lenders very much have a ‘one-size-fits-all approach’ when it comes to mortgages, but a contractor broker is different. They should listen to your circumstances and mortgage needs and tailor a solution fit to the individual. Everyone’s circumstances are different; therefore, a good broker should be able to adapt and recommend the right mortgage which is fit for purpose.
All brokers should be fully authorised and regulated by the Financial Conduct Authority (FCA) which ensures they are qualified to provide advice and will continuously keep up to date with market trends and changes in policy.
5.? Strong Communication Skills
Not only should a good broker be qualified to provide advice, but communication is key. The mortgage application process can be a very stressful time, particularly if it’s your first time so being regularly updated is imperative. Mortgages can be complicated with a lot of jargon and abbreviations often used; your mortgage broker should be able to explain each step of the way in easy-to-use language to ensure you know exactly what is going on at any given point in the process.
Communication is also key when it comes to potential challenges or hurdles, applying for a mortgage is never easy – particularly as a contractor! There can often be challenges along the way, so being informed of what challenges may lay ahead can ensure the process is as smooth and as stress free as possible. Going back to our earlier point of an experienced broker, they will know what to expect and should be managing your expectations accordingly.
6.? Personalised Support Throughout the Application Process
Whenever you are looking to arrange a mortgage, it’s important to have someone working closely with you who knows the process and understands what particular lenders require. We offer a personalised service, providing efficient and accurate advice to ensure your mortgage application is a smooth and pain free as possible.
Qualifying for a Contractor Mortgage
Securing a mortgage as a contractor involves different criteria compared to traditional employment. Lenders who specialise in contractor mortgages understand the nuances of contract-based income and have developed specific methods to assess mortgage affordability. By focusing on your contract earnings, these lenders can offer more competitive mortgage options that align with your financial reality.
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What Income is Used When Calculating a Contractor Mortgage?
When it comes to calculating a contractor mortgage, lenders typically use your contract earnings as the primary measure of income. This includes day rates, hourly rates, or annual salaries derived from your contracts. To determine your annual income, lenders will multiply your day rate by the number of working days per week and then by the number of weeks worked per year. This calculated annual income forms the basis for assessing your mortgage affordability, ensuring that the mortgage you receive is tailored to your earning capacity.
Mortgage Lenders and Options
Finding the right mortgage lender is crucial for contractors, as not all lenders are equipped to handle the unique financial situations of contract-based workers. Fortunately, there are several top mortgage lenders that specialise in contractor mortgages, offering flexible criteria and competitive rates. Working with an experienced mortgage broker can help you navigate these options and find the most appropriate lender for your needs. Let us help you find them.
In summary, it’s highly recommended if you are a contractor to work with a broker who understands the way contractors work, who know the process inside out and have relationships across the market to ensure contractors have access to the mortgage options they deserve.
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Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
There may be a fee for mortgage advice. We typically charge a broker fee of ￡495, however the amount we charge can depend on your individual circumstances.