Contractor Mortgages - getting one doesn't have to be difficult!

Have you ever applied for a mortgage whilst working freelance? Historically lenders have penalised contractors when it comes to sourcing a mortgage. This is because most lenders have a simplistic view of what qualifies as relevant earnings for lending purposes.

Contractors working through a limited company are assessed on salary and dividend drawings. For tax reasons, many contractors working through a limited company will draw a minimum salary and also restrict dividend payments to avoid higher rate tax. Although this is a perfectly reasonable tax planning strategy it also has the unintended consequence of reducing the amount a contractor is eligible to borrow under the standard criteria used by most mortgage lenders.

In contrast, a specialist contractor mortgage broker will make use of contacts developed with lenders and mortgage networks to directly present the contractors application to senior underwriters so that the full earnings potential is taken into account - including earnings which are not paid out but retained within the company for tax planning purposes.

Many contractors have also been let down by non-specialist brokers who have approached the wrong lender or poorly packaged the application. Each failed application leaves a footprint on an applicant's credit record, this makes the next application more difficult and it is therefore essential to get it right from the start.

Choosing a good mortgage broker is essential in today's current financial climate. A specialist contractor mortgage adviser can save you the hassle of dealing with high street lenders who are unfamiliar with the contracting market. This is increasingly important in the current financial climate as lenders are tightening lending criteria and this trend is predicted to continue with the scheduled introduction of increased regulation.

A specialist contractor mortgage broker will find the best mortgage provider for you, one who will make you a mortgage offer based on your contractor rates (up to 4-5 times annualised contractor rate) and will not require 2-3 years accounts, like most conventional lenders.

Contractors should not settle for self-cert mortgages with expensive charges and high interest rates. Avoid brokers and lenders who place restrictions on contractors because they are not prepared to assess you on your annualised contractor rate.

John Yerou is Managing Director of Freelancer Financials, an independent Financial Adviser that specialises in finding financial solutions tailored to freelance contractors.

If you wish to be contacted about contractor mortgages, please request a call back from one of our financial advisors.

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