When it comes to getting a mortgage as a contractor, everyone has different opinion and story to share. This story is based either on their or someone else’s experience. However, despite the discouraging stories you might have heard. It is possible to get a mortgage as a contractor by providing all the necessary documentation and following certain steps before applying.
Experience as a contractor
First of all, it is usually necessary for you to have two to three years experience as a contractor. However, it can also be possible to apply for a mortgage based only on the contract you currently have and not taking into consideration previous years of your work experience. You will need to provide a copy of your current contract, to confirm your ID and provide your bank statements. It is however advisable that you have already been contracting for six months before applying, which increases your chance of having a mortgage approved.
Secondly, in order not to be placed in a “high-risk” category, your credit rating should be clean. In other words, your mortgage payments or credit card bills must not be defaulted. Otherwise you might be placed in a “high-risk” category and therefore applying for a mortgage might pose a bigger challenge.
When it comes to deposit, you should seek for 10% to 25%, which is an average value and should not be a problem to find. Deposit requirements may vary, but generally they should be the same for contractors and for permanent staff.
Similarly, interest rates are also the same for contractors and for permanent staff. They can sometimes even be lower for the contractors, since they are able to have a bigger deposit and hence reduce their interest rate and monthly payments. It is a common myth that contractors will be charged a higher rate. The truth is that higher rates are charged when, for example, the base rate changes – and this affects everyone, not only the contractors.
One of the problems might be the very process of granting a mortgage, which can be complicated and long-lasting. However, the mortgage is possible to be granted solely by your contract rate. Which means you will be spared of losing time, collecting references and having additional costs. Watch video for more interesting information about mortgage.
It is advisable that you do not seek for a mortgage deal yourself, but to seek for a contractor mortgage specialist. They are far more familiar with the contracting world. They can provide you with useful advice and help and spare you the unnecessary waste of time and possible mistakes you might make.
What is also important is that your contract is up to date. With clear statement of your current contract rate and the contract length. Finally, it is important that you know your limits and not go over them, in order not to have any difficulties with monthly repayments. Keep in mind that interest rates might increase and provide yourself with some space so you can stay able to repay your monthly debt in full.