It has been suggested that the implementation of the Agency Workers Regulations will make it harder for umbrella company contractors to secure a mortgage.
Mortgage lenders have always viewed the employment status of contractors with risky eyes. Contractors and freelancers have struggled to persuade banks and building societies that they receive payment from a third party, especially when expenses and payroll fees feature on their payslip.
Furthermore, lenders say that AWR has made their lending decisions even more complicated because payslips do not show what an individual really earns.
Some lenders will grant an IT freelancer mortgage on the value of a gross annualised contract, but in order to qualify the contractor needs to be named on his or her contract. And this is where the problem lies.
Since the introduction of AWR, a lot of umbrella companies have firmed-up on their contractor’s employment status. Increasingly, contracts do not mention the name of a contractor, meaning they cannot avail of specialist mortgages based on contract rate. The payslips that they do receive also mention various headings and deductions that make mortgage companies wary.
Despite these seemingly insurmountable obstacles, umbrella company contractors should not be tempted to tell lies on their mortgage application forms. They must come clean about their employment status and if they are working on a short-term contract, the lender must be informed, Failure to do so could see them charged with mortgage fraud.
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Image: Houses at Melnik by Klearchos Kapoutsis
