High St. affordability calculations: antiquated and biased!

The High Street, as a rule, cannot grasp how contractors work. If you’re self-employed, you’re self-employed. Lenders place all independent professionals in the same hat and assess them on their tax return or accounts.

This is so not the best way of working out how much contractors can afford. That’s because most limited company contractors keep salary and dividend drawings low.

Showing off your best asset (clue: it’s hidden!)

Both tax returns and accounts are disproportionate compared to the income you’ve generated. What they won’t show is the retained profits within your business.

The vast majority of in-branch advisers will only assess you on the amount you’ve declared for tax purposes.

You may be earning more money than you’ve done in your life to that point. But because of the way bank staff pigeonhole self-employed people, you’ll get a rough deal on the High Street.

Underwriters, however, are aware of any contract-based underwriting policy the bank has. That’s if their employer has such a facility. Not all High Street banks are “contractor-friendly”.

It’s these underwriters, with whom we deal, that will make the difference. We know how to best demonstrate your affordability. They know how to assess you, based on that presentation.

It’s not about accounts or tax returns. It is about getting you the best mortgage the value of your contact can buy. That’s what contract-based underwriting does.

Author: John Yerou

John Yerou is a pioneer of contractor mortgages and owner and founder of Freelancer Financials, Contractor Mortgages®, C&F Mortgages and Self Employed Mortgages, trading styles and brands of the award-winning Mortgage Quest Ltd.

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