Contractor mortgage rates (A guide)
In this brief guide, we are going to discuss contractor mortgage rates.
Contractor mortgage rates table
|Lender||Product||Initial rate||Rate ends||Cost for comparison||Redemption period|
|Natwest||First Time Buyer||1.19%||31/01/2022||3.8% APR||31/01/2022|
|Coventry building society||Offset||1.49%||31/12/2021||1 4.3% APR||31/12/2021|
|The mortgage works||Buy to Let||BR + 0.69%||30/11/2021||1 4.5% APR||30/11/2021|
|Natwest||Next Time Buyer||1.24%||31/01/2022||2 3.8% APR||31/01/2022|
|Leeds building society||Discount||1.39%||2 years ||4.8% APR||2 years|
|Halifax||Tracker||BR + 0.53%||31/12/202||1 3.8% APR||31/12/2021|
The contractor mortgage rates above are not live rates. You should check with each lender to ensure you get their live contractor mortgage rates.
Which banks give mortgages to contractors?
Below are a list of ‘contractor-friendly’ mortgage lenders:
Leeds building society
Can contractors get mortgage?
Yes, contractors can get mortgages but the only challenge they will have is proving their income. There are many mortgage lenders in the UK who now offer contractor mortgages with competitive rates.
How much mortgage can I get as a contractor?
As a contractor, the size of the mortgage you can get may be based on the day rate which you earn per day. Mortgage lenders usually use your day rate and multiply that by the number of days you work each week to work out your average weekly earnings. They will then multiply your average weekly earnings by 48 to get your estimated annual earnings. The mortgage lender will then use your mortgage multiple and multiply your estimated annual earnings by their mortgage multiple to find out what the size of the mortgage they may be able to give you is.
If you earn £200 per day and work 5 days a week then you could potentially get a mortgage of £240,000 with a mortgage multiple of 5.
Contractor mortgage rates
Contractors are usually very sceptical about what mortgage they can get if any. They are also very concerned about what contractor mortgage rates may be available to them.
There are now more mortgage lenders who are willing to lend to contractors than before and hence the mortgage lending criteria are now more suited to contractors and their way of life.
The contractor mortgage rates are now becoming more in line with typical residential mortgage rates meaning being a contractor is now no longer a reason to pay higher monthly mortgage repayments on a similar mortgage than someone who was fully employed would have to.
Contractor mortgage lenders are more interested in your income and the reliability of your income. When making a contractor mortgage application you should do your best to ensure your ability to repay the mortgage off are highlighted. You should submit as much supporting documents to prove the reliability of your income.
You will typically need to submit at least 3 years worth of accounts, an accountant’s certificate for a mortgage, any contracts you have showing your current work rate, your bank statements showing your income and your tax return documents (SA302 tax calculation form).
Some contractor mortgage lenders may accept less than 3 years worth of accounts but will usually require a minimum of 12 months.
“If your contract work is carried out through a limited company structure, it may be beneficial to discuss your mortgage plans with your accountant as early as possible – they could be able to advise on the best way to structure your salary, dividends and retained profits to balance between maximising tax efficiency and ensuring your accounts truly reflect your income when reviewed by a prospective lender for affordability.”
Finding Best Contractor Mortgage Rates
You can find the best contractor mortgage rates by using a contractor mortgage calculator or contractor mortgage comparison table. There are a variety of contractor mortgages out there and they all have various contractor mortgage offerings.
If you are worried you won’t be able to get a contractor mortgage then you may want to speak to a contractor mortgage broker who has some experience of the contractor mortgage market.
There may be a few specialist contractor mortgage lenders who suit you.
Using a mortgage broker to find the best contractor mortgage
You may want to consider using an independent mortgage broker to get a mortgage and by default find the best contractor mortgage lender for you.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application. Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.
Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.
In this brief guide, we discussed contractor mortgage rates.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.