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Contractor Mortgages®
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Securing Mortgages for Contractors & Freelancers!
Securing Mortgages for Contractors & Freelancers!

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Contractor Guide: Dealing With Mortgage Rejection

You started out contracting for all the right reasons. Flexibility, honing your skills, better income and the ability to keep more of it through a limited company payment structure.

What you didn’t expect was the problem you’d have getting a mortgage as a contractor.

Many of our clients reach us after having had their mortgage application turned down on the High Street.

While it’s not right, we understand why most High Street mortgage lenders are reluctant to lend to contractors.

On the one hand, their advisors can see a contractor’s top line. But on the other, the effective salary - the bit High Street lenders can use - equates to, well: not a lot.

The problem - or one of them, at least - is how your income is translated for an underwriter.

In branch, advisors have neither the skill nor the basic #mortgage affordability software to make the most of a professional contractor’s gross income.

That’s where a specialist mortgage broker steps in.

Our guide to dealing with mortgage rejection as a contractor looks at the problem - and solutions - in more depth: http://contractorguides.uk/mortgages/mortgage-rejection/

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The specialist broker's role in securing mortgages for contractors

Have you been to see your bank about getting a mortgage as a #contractor, recently?

On a scale of 1 to 10, just how painful was it?

Yep. Thought so.

Look. That in-branch #mortgage advisors can't get their head around your true affordability is no surprise to us.

You have to face up to it: as a limited company contractor, your income and payment structure are special!

Yes, you might be earning more than ever. But your accountant ties most of that up in your company as retained profit.

A typical High Street mortgage lender uses outdated affordability formulae.

No matter how hard you point, gesticulate and bounce like a frog on your seat, they can only use what they see in the salary column!

Stop it with the masochism, already.

Find a #broker who both understands contracting and can also interpret your income to an amenable underwriter.

Give yourself a break: http://ow.ly/ts7M30ePtiR

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The specialist broker's role in securing mortgages for contractors

Have you been to see your bank about getting a mortgage as a #contractor, recently?

On a scale of 1 to 10, just how painful was it?

Yep. Thought so.

Look. That in-branch #mortgage advisors can't get their head around your true affordability is no surprise to us.
You have to face up to it: as a limited company contractor, your income and payment structure are special!

Yes, you might be earning more than ever. But your accountant ties most of that up in your company as retained profit.

A typical High Street mortgage lender uses outdated affordability formulae.

No matter how hard you point, gesticulate and bounce like a frog on your seat, they can only use what they see in the salary column!

Stop it with the masochism, already.

Find a #broker who both understands contracting and can also interpret your income to an amenable underwriter.

Give yourself a break: http://contractorguides.uk/mortgages/

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The SMART Way for Contractors to Fund Buying a Home

Contractor mortgages have changed. It's imperative that professional contractors seek the expertise of a specialist broker to explain why.

We get many contractors come to us for a mortgage on the recommendation of one of our past clients. That's when the community genuinely works for the good.

But there's a downside to this word-of-mouth that makes me shiver.

I fear for contractors whose fellow contractor has sent them to the bloke they used to get them a mortgage two years ago.

For one, more lenders welcome contractors than ever. Two years doesn't seem a long time ago, but there's a better than evens chance that their are more competitive contractor mortgages today than back then.

But here's the biggest part that worries me.

Contractors' individual circumstances play a massive part in the contractor mortgage process. It takes a broker who specialises in the field to interpret the elements of a contractor's income into a language an underwriter can understand.

There's always the chance that a generic broker succeeded in getting one contractor a good deal.

But that doesn't mean they're a good bet for all contractors. Specialists are specialists for a reason. Any contractor will tell you that, right? ;)

http://contractorguides.uk/mortgages/getting-approved/

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Has your Public Sector client switched your contract to PAYE payroll?

You sign up with an agency to supply your service, the skill you've honed to perfection, to the #PublicSector. They call you; you're hired. Ka-ching!

This is what you became a professional #contractor for. The work, the lifestyle: they're everything you hoped they'd be.
What you didn't expect was for this flying carpet to be whipped from beneath your feet.

Now, Public Sector clients decide the status of all their outsourced staff. With #payroll an easy option for them, the magic is fast disappearing from the client-contractor relationship.

So, does your public sector contract span the start date of the switchover, April 6th, 2017? Or has your new one started since?
Either way, check that your client hasn't inadvertently placed you on payroll. If they have, it's time to renegotiate.

In this post, we expand on the advice Chris Bryce (IPSE) gave after the shock announcement: https://www.freelancerfinancials.uk.com/ipse-warns-of-new-ir35-risk-with-automatic-switch-to-payroll/

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* Finance Basics Every Contractor Should Know***

For most professional #contractors and freelancers, engaging an accountant is as essential to their business as getting out of bed to travel to site.

Some contractors have found out the hard way and only hired a specialist accountant after attempting their limited company #accounts themselves.

Others have recognised that they've got better things to do with their time than slave over balance sheets at the weekend from the outset.

But we know from experience that, every year, some contractors and freelancers get curious. Rather than splash out on an accountant, they decide to try the DIY accounting method.

What they don't realise is how dynamic the laws that govern what are/aren't permissible expenses are.

They perhaps don't understand the full scope of IR35.

Even worse, they miss out on claiming certain tax reliefs that could bolster their income.

So, for those hardy few, we've put together this small, 10-minute read #guide to give independent professionals an overview of limited company finance:

https://www.freelancerfinancials.uk.com/related-services/contractor-finances/

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What contractors need to know before scouring the High Street for a mortgage

On one hand, banks have come on a pace these last few years. Online banking and banking apps are becoming the norm for many of us.

One area with which the High Street isn't yet up to speed is with the growing and varied ranks of the UK's self-employed.

Moreover, the way banks work out #mortgage affordability for this dynamic sector.

I'm not talking sole traders or sub-contractors.

I mean professional #contractors, like NHS consultants, IT professionals and engineers in the Oil and Gas industry.

The way this latter group maximise their potential is by incorporating their own limited company.

This acts as a payment structure first and foremost, a way to deal on a B2B basis with other #professionals.

But as a limited entity, these companies' directors also avail themselves of certain tax breaks.

The sad fact is, most in-branch staff don't get these structures. Not surprising, as most professional contractors hire accountants to manage their books for them.

If you've faced rejection on the High Street, it's not you as a contractor. It's the way you structure your pay that's the issue.
Stress not; there's a better way:

https://www.selfemployedmortgages.com/high-st-mortgage-lenders-and-limited-company-payment-structures-doh/

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Getting a mortgage as a contractor: the route one journey

There are two ways you can get a mortgage as a contractor:

A specialist contractor mortgage broker, awesome if you need someone who:

- can give you a quick decision and turnaround (usually 4-6 weeks from application to completion, if that!);

- understands you and gets to know you as a person;

- gets the way you work and pay yourself;

- can interpret all that, including your TRUE affordability, and present it to an equally savvy underwriter at a lender’s head office.

The High Street, great if you:

- have got months to wait;

- a hard nosed outlook;

-little fear of rejection, and

- decent walking shoes;

- What’s it gonna be?

Option 2, the High Street? You’ll spend hours - even days - trudging the pavements, and what for? Your quest will culminate in a fruitless search for an in-branch advisor who understands the nature of professional contracting, day rates and retained profit.

Or Route 1: one call to our experienced advisors, self-employed professionals themselves, who know the way you work inside out. Plus, they’ve got direct lines to underwriters who’ll assess you on what you’re worth: your gross contract rate

I’ll leave it with you.
https://www.contractormortgages.com/blog/how-do-i-get-a-mortgage-as-a-contractor/

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Clients often ask why I've spent the last decade and a bit "championing contract-based underwriting".

There's no single, definitive answer, but I do remember the catalyst.

I watched countless high-earning contractors dejected after being turned away by in-branch advisors on the High Street.

It was getting ridiculous.

Why?

The High Street's dated lending model couldn't (and often still can't) handle gross contract earnings and/or net profits.

Today, some enlightened lenders use 'contract-based #underwriting' to work out how much a #contractor can afford to borrow.

It's better, but not nearly enough. Using contract income to secure contractors a #mortgage remains a niche service.

So if your lender can't offer it, look for one that does!

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How much can contractors borrow for their mortgage (& other Eureka moments explained)?

One problem contractors bring on themselves when applying for a mortgage is describing the way they work incorrectly.

In the UK, the term 'freelancer' is so generic and used so liberally that many contractors don't know two things:
• that a contractor is actually what they are, not a freelancer or simply 'self employed';
• that the contractor status is appraised not only differently, but favourably (using their annualised daily contract rate), by #ContractorFriendlyBanks if approached through the right medium.

When the penny drops, it's like:
• ooh, how much more can I borrow using my #DailyContractRate, then?
• you can get me a mortgage even if I've only just started contracting? Wow!
• okay, so how do lenders calculate my affordability differently as a contractor?

To clarify what lenders class as a contractor, answer these 'Eureka' moment questions and explain how we can help, we've put together a brief guide.

It works in conjunction with our #MortgageCalculator, even estimating how much you can borrow if applying for a joint mortgage with a 'permie' partner »
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