First Time Buyer Contractor Mortgage
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Mark Notley talks to us about First Time Buyer mortgages for people in contracting.
Is it harder to get a mortgage as a First Time Buyer Contractor?
Lenders view contractor mortgages as higher risk lending. That, combined with being a First Time Buyer, is what makes it a bit harder. Not all mortgage lenders will take on contractors, they just want a client who is either employed or self-employed, and if you don’t fit into those they won’t take you on. But generally if you go to the right broker, we can sort out the best route for you to go down.
What does a First Time Buyer Contractor need to consider when applying for a mortgage?
Whether you’re a First Time Buyer Contractor or not, it’s important to keep your credit file clean. Make sure you’re on the electoral roll and that you have your deposit sorted out.
Make sure you’ve budgeted for your expenses and speak to your accountant for the relevant proof of income. That might be your accounts or tax calculations and tax year overviews. It also helps if you have solicitors ready. They’re the general things that will help First Time Buyers.
On the contractor side, there are different types of contractors. Some lenders treat contractors that earn over that £500 or so a day as purely employed. They would take the value of the contract as your income – but not all lenders do this.
Others will look into the type of contract, which could be open-ended or a fixed term for a year or two. With fixed contracts the lender may worry about what you are going to do in a year’s time or two years’ time when the contract ends. The way to get around that is to give as much information as possible about your contract to a broker. We’ll come back with the best options for you.
How do I find the most appropriate mortgage as a First Time Buyer Contractor?
It’s a case of finding an appropriate mortgage based on your personal circumstances as well as your contract. It may be that you’re looking for a short-term fixed rate mortgage or a long-term fixed rate. It may be that you’re looking for something with flexibility to work alongside your contracting. We will work with you on a ‘fact find’ where you tell us all about your situation. Then it’s down to us to find options to suit you based on your needs and circumstances.
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How will new contractors be assessed for affordability?
New contractors – as opposed to people that have got experience in contracting – will be assessed by the lender in different categories. So if you are a First Time Buyer contractor, they will want to see a CV of your history. If you were in construction and then went into IT contracting, lenders will of course be more cautious. How do they know you can do the job and stay in that contract?
So it’s down to each individual case and having history in that line of work. That will make the lender more confident.
If your business is set up with limited liability, again it works case by case. You can apply under your limited company name or as a contractor. Lenders may view you as employed if you are earning a certain amount of money even though you are a company director.
It’s all down to income, your experience as a contractor and how much you’re going to borrow. If you want a 90% mortgage lenders are going to look at you much more closely than if you’re borrowing under 75% of the property value.
What documents will I need to prepare as a First Time Buyer Contractor?
The first thing is to make sure that you’ve got your contracts available, whether you contract just to one company or have multiple clients. You will also need tax documents proving your income. Your CV is also important.
I would also recommend gathering bank statements to show your income is regular and healthy, plus of course your personal ID and proof of address. Let your broker have a look through all these documents and come back to you.
How much will I be able to borrow and what deposit will I need?
It again depends on your experience and how the lender will classify you. You can get contractor mortgages up to 90% or 95% but it really depends on your position. There’s no reason to think that you wouldn’t get up to 75%.
We will explore your circumstances, speak to the lenders and come back with the most positive options for you.
What other advice do you have on First Time Buyer Contractor mortgages?
In this market it’s very easy for people to part with money upfront to a broker. Companies do this because exploring mortgage options is time consuming. But there are lots of us around – including Total Home Loans – that don’t take any money upfront from clients.
We take your enquiry, explore your circumstances and find you the most suitable lender and products. It is a little bit more difficult for a First Time Buyer Contractor, so don’t part with any money until you are assured of getting a good mortgage.
Your property may be repossessed if you do not keep up repayments on your mortgage.