Possibly one of the most common questions when people leave the safety of permanent employment to venture into the world of contracting is ‘how will I get a mortgage now I don’t get regular payslips?’

Here at Contractor Financials we can offer you the answer with our specially negotiated ‘contractor mortgages’. These products allow you to secure a mortgage based on your contract alone so follow these 10 tips for a contractor mortgage and you will be ready to buy your own home.

Use our Mortgage Calculator to find out how much you can borrow

The first question that most contractors ask is ‘how much can we borrow’ but it’s easy to find out the answer to this using our mortgage calculator. Simply enter your contract rate and our calculator will do all the hard work for you.

Work out if you can afford the repayments

Many people only look at how much they are permitted to borrow rather than how much they can afford to borrow. It is important to take into consideration your monthly expenditure and disposable income. How will your mortgage repayment affect this and can you sustain the repayments if interest rates rise. Here at Contractor Financials we stress test your application based on interest rates of 7%. This ensures all our clients can afford their mortgage if interest rates drastically increase over the mortgage term. Use our repayment calculator to work out the cost of your mortgage.

Keep your credit rating shiny

Your credit score is key to securing a mortgage. We recommend all our clients’ sign up to a credit profile service, such as Experian. It is important to keep your details up to date and contact the relevant companies if anything seems amiss. It is vital to keep your credit rating as ‘clean’ as possible, even things like not updating the electoral role when moving house, or missing a single credit card payment can affect your rating and result in your mortgage application being turned down.

Keep your contract close to hand

To apply for a contractor mortgage you will need a signed copy of your current contract to prove your income, so make sure you have a copy filed away for when the time comes.

Organise your documents

It is crucial to have all your documentation in order to speed up the application process. If you have a limited company, you will need to supply your last three months personal and company bank statements, plus two utility bills, a copy of your current CV and two forms of ID.

Save, save, save for a deposit

The 100% mortgage is a distant memory, the best rates now go to those who have saved for a deposit. However thanks to the Governments help to buy scheme, contractors can get on the housing ladder with as little as 5% deposit. Remember though, the more ‘equity’ you can put into a new property the less risk the lender is taking on, so they are able to offer lower rates and therefore lower repayments.

Mind the gap….

As a contractor you may find that you have breaks in your contracts, but it is important to be aware that too many gaps may have a damaging impact on your mortgage application. Many lenders are now aware of contractors working habits and gaps of up to six weeks on your CV are usually considered normal but any lengthy breaks may be questioned.

Tax can be taxing

New stamp duty land tax reforms were implemented in December 2014. Instead of the property purchaser paying tax at a single rate on the entire property price, you will only pay the rate of tax on the part of the property price within each band, like income tax. There will still be no tax on property purchases up to £125,000. Above this there will be several bands, between £125,001 and £250,000 the rate will be 2%, £250,001 and £925,000 5%, £925,001 and £1.5m 10% and above £1.5m the rate will be 12%. The rules in Scotland are slightly different, stamp duty was replaced by Land and Buildings Transaction Tax (LBTT) and this was applied in April 2015 so please contact us for further information.

Stamp duty must be paid on completion, it is vital you factor these costs into your calculations when looking to purchase a property. If the property you are purchasing is priced just above one of these thresholds then it may be worth negotiating with the Vendor to reduce the price which will impact the tax bracket you fall into.

Protect your Assets

Upon exchange of contracts the property is legally yours. If anything does go wrong between exchange and completion it is your responsibility. You will need to safeguard your investment and ensure you have satisfactory Buildings insurance cover in place to protect your home. Mortgage lenders often require proof of insurance before releasing the mortgage funds. When you have moved in, you will also require contents insurance to protect your possessions against accidental damage.

Alongside protecting the house itself, it is also important to consider protecting your loved ones against the burden of this new debt. Speak to one of our dedicated team of protection specialists on 0333 370 8888, to find out more about Mortgage protection policies and how you can protect your family financially should anything happen to you or your partner.

Protect your Assets

Upon exchange of contracts the property is legally yours. If anything does go wrong between exchange and completion it is your responsibility. You will need to safeguard your investment and ensure you have satisfactory Buildings insurance cover in place to protect your home. Mortgage lenders often require proof of insurance before releasing the mortgage funds. When you have moved in, you will also require contents insurance to protect your possessions against accidental damage.

Alongside protecting the house itself, it is also important to consider protecting your loved ones against the burden of this new debt. Speak to one of our dedicated team of protection specialists on 0333 370 8888, to find out more about Mortgage protection policies and how you can protect your family financially should anything happen to you or your partner.

To find out how we can help you secure a contractor mortgage or for more top tips, call us now on 0333 370 8888 or fill in a contact form.