Contractor Mortgages for First Time Buyers

Buying your first home should be an exhilarating ride. Yes, you should expect ups and downs. But in the end, it should be a satisfying trip and one you can’t wait to take again.

But for many self-employed people, there are more downs than ups and lenders often abort the ride before it ends. “Come in, number six; your time is up”, as it were.

Why do contractors and freelancers struggle to convince mortgage lenders that they’re good for a loan? It shouldn’t be this way.

With the right guidance, the ride to home ownership can provide plenty of thrills without the spills. Specialist mortgage brokers put you on the right track, even place you in the driving seat.

If that sounds like the ticket you’re looking for, all aboard here! The last train to Mortgageville is about to depart.

The Key to Home Ownership for Self-Employed People

Mortgage lenders once differentiated little between first time buyers and those remortgaging/moving home. But in recent times the housing market has changed, itself experiencing highs and lows.

Before the Government instigated Help-to-Buy, 25% deposit became a commonplace post-credit crunch prerequisite. This bred fears that a whole generation would miss out on home ownership. For many, those fears remain well-founded.

True, Help-to-Buy can get you on the property ladder with only 5% deposit. But not everyone has the spotless credit history they need to qualify for the initiative.

Besides, there are more competitive mortgages, especially for contractors. The key to a successful application is finding a broker who can match those mortgages to your circumstances.

Why a specialist broker who understands the way you work is a must

It’s a little-known fact, but contractors on their very first contract can get a mortgage. Freelancers whose accounts show little in the way of take-home pay can also qualify.

High Street mortgage advisers may have advised that these criteria prove too much of a risk. On paper, they probably do to a regular IFA and their bank’s affordability calculations. But they’re looking at the wrong metric to work out what size mortgage you can or can’t afford.

A specialist broker knows what to look for in your accounts/contract that an underwriter would look for. This is the difference.

It’s accepted that limited company owners utilise tax breaks to retain more of their income. Optimising tax efficiency, however, has a severe negative impact on take-home pay. A typical adviser will not grasp this concept one iota.

For most lenders, what a mortgage applicant ‘picks up’ is a huge factor in determining how much they are willing to lend. You see the conundrum?

To give you an idea if your adviser is on the right track, they should offer you:

a competitive interest rate, even if you only have a 10% deposit;
a mortgage based on your contract rate, not take-home pay;
between 4½-5 times your contract rate for the value of the property you want to buy;
low or zero set-up fees (depending upon the first-time buyer mortgage they offer);
free legal fees and conveyancing;
a way to track the progress of your application at all key stages.

From experience, we know that these factors offer reassurance to first time buyer contractors. Especially those who’ve been let down by the High Street and need an expert to take the stress out of the whole process.

What you need for a First-Time Buyer Contractor Mortgage

The reason C&F Mortgages exists at all is to combat this ignorance shown by High Street lenders. Moreover, we promote contractors’ and freelancers’ affordability in a way that they can use.

Having sat down with the actual underwriters themselves, we’re confident in what we ask you to provide. Going direct, advisers may well have asked you to provide way more ‘evidence’ than is necessary.

That’s because they’re trying to build up a case for your mortgage using irrelevant documents. It’s all to do with the way their calculation works: around PAYE. They try to support your low take home pay with reams of accounts, which has an adverse effect on your application.

Whether you work through an umbrella company, as a company director or ad hoc freelancer, we can help. We’re not tied to a specific lender, giving you access to all contractor-friendly lenders. Neither are we mere affiliates; we are bona fide accredited brokers ourselves.

Our relationships with underwriters, knowing what they need to approve your application, gives you:

lower administration fees, compared with other brokers who charge £500;
access to the whole of market, given our independent specialist broker status;
a fast-track mortgage application, only sending documents underwriters have asked to see.

In addition, we assign you your own account manager, from application to completion. They’re there for any queries you have at any stage. But they can also advise on relevant mortgage protection and critical illness cover.

You wouldn’t believe how many clients insure their office contents and pets, but fail to protect their home or family. In many ways, ensuring you can maintain your livelihood whatever happens is as important as buying a home in the first place.

For first time buyers, protecting against unforeseen circumstances from day one is the best way to form the habit. And, for sure: getting the best interest rate for your contractor status isn’t a bad idea, either.