Umbrella Companies | Mortgages for Contractors

Mortgages for contractors

We have heard about many contractors who have struggled to get a mortgage because lenders want proof of a consistent income. And as frustrating and unfair as this may seem, it’s the frustrating reality that many self-employed professionals face.

However, it is not all doom and gloom, and there are also many success stories of contractors who have secured a mortgage for their dream home. Therefore, we wanted to create a few tips for you to follow to secure a mortgage.


Speak to a specialist

One of the main reasons contractors face difficulties securing a mortgage is the variety of ways they can operate and pay themselves. Banks and high street mortgage advisors are not always familiar with the intricacies of how contractors can work through a limited company, umbrella company or sole trader set up and get paid, draw money or operate.

Therefore, to get a viable mortgage rate as a contractor, we would highly recommend speaking to a specialist contractor mortgage lender. Specialist contractor mortgage lenders are familiar with the different way’s contractors can get paid and will have other processes in place to determine your eligibility for a mortgage and find one that suits you.


Review your credit rating

It’s no secret that your credit score is a crucial factor in securing a more competitive mortgage. Before you begin the process, check there are no adversaries against your name as they could negatively impact your chances and takes steps to improve your rating (if necessary).


Save, save, save

When planning your finances and looking at how much you will need to save, a 10% to 25% deposit is the recommended range for contractors. However, if you want to strengthen your position, a larger deposit than required will improve your chance because you will be considered less of a financial risk in the eyes of the lender.


Understand your goals and what is achievable

Be realistic about what you can afford, even if a lender can offer you a higher mortgage then you were expecting, is it an achievable monthly repayment for you? Consider the financial obligations of your company, personal financial matters or time-off in between contracts.

Come up with a strategy

Knowing your goals and the position you’re in, what are the steps you need to take to get there? We’ve created a short checklist of things you may need to consider:

How will you prove your income?

Lenders will want to see proof of income and the amount of tax you have paid over a prolonged period. The longer you have been self-employed or trading, the more options you will have as you have more proof of income.

Lenders may ask to see evidence of the following:

  • At least six months’ worth of payslips if you are a CIS or umbrella employee
  • A Personal Tax Return
  • Bank statements for your account and a business account (if applicable)
  • Ideally, two years’ worth of signed company accounts if you are a limited company director

Depending on which business structure you use will depend on how lenders will assess your eligibility for a mortgage. For example, they could look at your income based on salary and dividends if you are a limited company director.

Have all your personal and business accounts in order

As a contractor, lenders will want to see evidence of contracts to see how often you work, the length of the contracts and any periods in-between assignments to see if you will be able to make the repayments. Always keep a record or any past employment contracts, business paperwork, electronic records and ensure everything is up to date and paid on time.

Do you have any insurance or protection policies in place?

Lenders often like to see evidence of any life insurance policies or other protection policies you may have in place which could cover the mortgage if necessary.

Make sure you on the electoral roll

Lenders often use the electoral roll to confirm personal information and to see your credit score. Your information needs to be up to date before they will consider offering you a loan, mortgage or another financial sum of money.


Read forums for advice

Forums are a great way to ask fellow contractors and freelancers about their experiences and any tips they may have to secure a mortgage.


Choose the right moment

There could be a lot of talk in the news of record low mortgage rates or the property prices going down, but you should not apply until your finances are in order, and you are ready. Lenders will only offer you rates based on what your current finances look like, and the best way to get a reasonable rate is not to apply before you are ready.


Start your search with our directory for contractor mortgage specialists

Are you looking for mortgage advice? Why not take a look at our contractor financial services directory. We’ve created a list of services you may find useful and is no better way to start your search than with dedicated providers for contractors.


Top 10 umbrella companies

Are you struggling to decide which umbrella company you should use? We can help! Please take a look at our top 10 umbrella companies for a list of FCSA accredited umbrella companies who can support you on your contracting journey.

Click here to see our top 10 umbrella companies!
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