As a contractor, looking for a mortgage can be a fairly steep mountain to climb. When you actually begin analyzing the situation and figuring out whether you should go ahead and make the decision, you are faced with a lot of ambiguities and a lot of possible issues. So, it’s absolutely normal if you feel frustrated during your quest for viable contractor mortgage.
There are some contractor friendly firms while there are others that don’t welcome limited company contractors. When you talk about the mortgage option with your friends and professional colleagues, you get to hear mixed opinions and different anecdotes from people. Let’s first answer some of the questions that arise in the minds of contractors while they are faced with this gruesome challenge and then move on to the actual mortgage finding part:
The simple answer is “No, you don’t.” For decades now, contractors have made the attainment of mortgages possible based solely on their contract rates. This entails that the perception present in the minds of people about having to prove their experience and displaying accounts with at-least 3 years of history is nothing but fiction. The people at Contractor Mortgages Made Easy or CMME have made it their mission to make the process of mortgage finding and undertaking a lot simpler.
They have made negotiations with many high street lenders for contractors to end up with some special mortgage underwriting terms. This has enabled them to make the arrangements of a mortgage that will be based solely on the current contract that you have, irrespective of your previous experience as a contractor. If you have sufficient evidence in the form of your contract copy, an identification and contemporary bank statements, then you are absolutely good to go.
The contracting world has a lot of risks and there is absolutely no denying that. If your lender has an adequate understanding of how the actual proceedings of the said world, then then they will know that you won’t be putting them at any more risk than their full time employees.
That being said, if you have a fair enough credit rating and you also possess a substantial deposit, then you will be given the “low risk” class and that will enable you to borrow at-least 4 times of your current contract rate. If there are any CCJ’s that despise you or if you haven’t come good on any credit card bills or mortgage payments in the past, then this could be more of a challenge for you than it ideally would be. It’s worth noting here that this is exactly how it would be for any other employee and that, your being a contractor doesn’t affect this in any way. Even if this ends up being a predicament for you, still you have the option of getting specialized mortgages that are designed to cater to these situations. CMME can once again prove helpful to contractors in this regard because they can pave your path towards finding the right type of people to talk on this matter.
If you end up calling a call center representative that hasn’t been trained and vetted with care, then they might end up telling you that you need at-least 6 months of contracting experience. These people are not to be blamed though because their supervisors often ask them to discover whether the contractors have been in practice for a sufficient period of time.
This precaution is done for the minimization of risk from the lender’s perspective. Once again, this is not a specific requirement and most of the time you shouldn’t ideally be asked to show an experience that dates back to at-least 6 months. CMME discourages the use of this stage and they let contractors have an easy pass by interacting with the most experienced and professional underwriters directly to arrange a mortgage for you. These sad underwriters know how the contractor world operates and also hold regard for the value that contractors can add to their business. It’s worth noting here that you need to have some proof of your occupation as a contractor before applying for a mortgage because they can’t offer funds to people who haven’t even been in the business at all.
Once again, this has been a myth that has been present in the minds of many contractors that have been on the lookout for mortgages in the past few years. Yes, there is a need for a deposit but the current average deposit requirement falls between 10 to 25 percent. After the credit crunch took place, many lenders have made the withdrawal of the 90 and 100 percent mortgages that were being given, but still there are very decent rates out in the market that can be enjoyed and can help your business out a lot. Here it’s worth remembering that you should never just get baffled by one lender’s excessively meager rate and settle with them; adequate research should be in place before agreeing on the best possible rate. CMME can also help you in this regard as their agents know exactly where you should be dragging your shopping car to.
Once again, the answer is a simple “No.” It’s startling when you actually hear people assuming this. The interest rates are generally the exact same for the contractors and the permanent staff, so there won’t be any special treatment that you would have to deal with and abhorred. There are some very rare cases when you might even get a lower interest rate. This can happen because as a contractor you might end up being in a state where you can actually put aside some savings and end up having a gigantic deposit that will in turn cause a reduction in your monthly payments and indeed your interest rates. If you have a good credit rating (which most contractors do) then too you can end up getting a better deal.
Once again this ambiguity has arisen because brokers who are new to the contracting world (or have no knowledge of the contracting world) have the habit of using the term “Self-certification” which they use for making mortgage arrangements for contractors. These have, after the credit crunch, become very hard to come by as brokers have stopped putting their trust in contractors. Anyways, self-certification wasn’t the best option for most of the contractors because it caused them to bear high interest rates and the loan to values rate also often ended up to be higher for them. If you go through CMME though, then you can have an easier task in hand as they have already made the negotiations on your behalf and talked to some of the finest underwriters to arrange terms that contractors love. So, that will allow you to get a good deal based primarily and solely on your contract rate which is close to a dream come true for many contractors searching for mortgages.
Now let’s look at some of the suggestions that can actually make your application process smoother and can get you an easy mortgage deal:
Most people like to do their work their own way and by using their own resources and links but it’s recommended that you should hire a mortgage specialist to provide you mortgage help, because this is an intricate process that when dealt with care, might end up getting you the best deal you will live to have. You might be able to go in the market yourself and land a deal single handedly but the majority of the banking staff and the call center agents aren’t exactly aware of the contracting world so you might end up failing to interact with them properly. When they ask for formal documents and details like employer details, proof of time employed etc. you might not be able to stay on the same page for long.
A mortgage broker in this regard can help in many ways because they have an increased experience of working with other contractors. Once again, CMME or Contractors Mortgages Made Easy can serve your purpose in the best way as they are a credible organization that has been recognized by many around the world. There are many pros of choosing an organization like CMME:
1.You won’t have to make hours of calls to different people trying to get your application processed.
2.You won’t have to wander across the high street trying to find a lender that knows what they are doing.
3.You won’t have to care about the legal formalities.
4.The deal that you will get will be one of a kind as CMME studies your contract extensively before suggesting you a lender from the high street that will cater to your demands and needs with aplomb.
5.You won’t have to provide references after collecting them from various sources or go through the hassle that inexperienced lenders force you to.
You will not have to go through inexperienced staff and call center agents that don’t know the real picture and can only rely on the information fed to them by technical people. Instead you will communicate directly with trained lenders that will know exactly what you want, exactly what can be done and your mortgage application will be dealt with easily.
There is no such thing as a “100 percent” mortgage; well not anymore at least. Since the credit crunch, the best we can get is a 90 percent mortgage. So, you will get the best rates only if you have been able to save a deposit. Anything between 10 percent and 25 percent should be aimed at. As already mentioned, if you don’t have any existing property which is currently worth more than what you initially paid for it, then still you can find mortgage deals out there but with increased rates. The thing is that the more risk you take on by putting your equity in the property, the lesser risk the lender is taking and hence they are going to be able to offer you rates that are lower and will require lesser repayments.
Unless you are among the top 10 contractors of the country, you need to have an astonishingly handsome credit rating to be able to get a good mortgage deal. If you have a good income and your deposit is also huge, you might still end up getting your application rejected just because your credit rating gets labelled “not good enough”. Lenders are getting increasingly sophisticated and stricter at the moment because of the changing economic conditions and you should hence avoid giving them any excuses to decline. That being said, try to keep your credit rating as clean as you possibly can. There are many reasons why your rating can go down; things like failing to update your electric roll while moving your house or missing credit card payments can hamper your bid to getting a mortgage by many folds.
Your contract’s copy needs to be up to date and signed when you actually apply for the mortgage. An obsolete contract will get rejected without any further processing. The entire length of the contract should be stated explicitly along with the contemporary contract rate. CMME also makes use of this information while making your mortgage application a lot more likely to get accepted. This will of course also relieve you of any stress of producing references and displaying three years’ worth of accounts.
Lastly, while actually applying for a mortgage, you need to be realistic and absolutely certain that you will be able to afford making repayments for the specified period of time. The figure that the lender is offering you must be something that you can afford every month and if they end up suggesting an amount that you believe isn’t worth getting a mortgage on, then you should decline upfront to avoid any future problems. The key here is to stay sensible and be self-aware. Also it’s worth remembering that the interest rates might also go up and if you choose a variable rate of repayments then they can end up being less affordable for you as time progresses. So, while choosing a mortgage it’s absolutely necessary that you be as pragmatic and futuristic that you possibly can.
While the whole process of getting a contractor mortgage is not simple, there are some suggestions and venues that when used, can go a long way in making the process a less cumbersome one. When a lender rests their trust in you and you rest yours in theirs, make sure that there is no communication gap and that all the details have been put to paper to ensure any future discrepancies.