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Contractor Mortgages: Things to Consider

Published: 09 June 2016
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Author: Carl Shave - CEO and co-founder
Last updated: 26May2024

Finding a mortgage can be stressful enough as it is, but the whole process can be even more daunting when you’re a contractor. With many lenders typically basing their underwriting for contractors on the same criteria they’d use for the self-employed, it has been an act akin to fitting square pegs into round holes. The result was ill-fitting assessments of mortgages that made it extremely difficult for contractors to find the right deal. Thankfully, much has changed with the emergence of a group of lenders that specialise in contractor mortgages. They understand that the needs and incomes of contractors cannot be assessed in the same way as PAYE employees. The result is a range of mortgages that meet the particular needs of this growing group.

What Types of Contractor Mortgages are Available?

As with mainstream mortgages, a wide range of different mortgage deals is available to contractors. These include: 

Fixed-rate mortgage: A rate of interest that stays the same for an agreed period of time (usually two to five years).

Tracker mortgages: A rate that changes in line with the Bank of England base rate, so you benefit from falls but have to pay more when interest rates rise.

Capped mortgages: You will never pay above the interest cap for an agreed period; however, if interest rates fall, you pay the lower rate.

Discounted mortgages: You pay the lender’s variable rate minus a discount for a fixed period of time.

Cash Back: You receive a cash payment when agreeing to a particular product – although you are likely to pay higher rates as a result.

What Will You Need in Order to be Accepted?

The beauty of contractor mortgages is that these specialist lenders understand the different factors that need to be taken into account when assessing the affordability of a mortgage. They also know that there are a good number of contractors out there without the standard minimum of three years of accounts to show as proof of earnings. Perhaps more important still is the fact that they understand your income can change from contract to contract, and even from week to week. The truth is that to apply for a contractor mortgage, you will not typically need to have a bigger deposit; you will probably not need to provide three years of accounts, and you will not necessarily need to have a long-term contract in place. In fact, anyone who has been contracting for over 12 months and has at least 6 months to run on their current deal should be eligible for a mortgage. Even those with less than 6 months left on their contracts should be able to find a deal. To learn more about contractor mortgages please get in touch with our team today.