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John Yerou
Securing Mortgages for Contractors & Freelancers!
Securing Mortgages for Contractors & Freelancers!


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Which Lenders Use Contract Rates To Work Out Mortgage Affordability?

There are dozens of mortgage lenders on the High Street. Each has their own view of what "self-employed" means.

As a #contractor, you may think that you fall under this category. The lender themselves may try to pigeonhole you as such, too.

In a way, you're both right. But here's the rub.

You, in all probability, hire an accountant to make the most of your employment status. That's a sensible move, from the perspective of keeping as much of your income as possible.

But to maximise that opportunity, you keep salary and dividend drawings low. It also means that the bulk of your income resides in your limited company as retained profits.

This scenario can cause you a massive headache. Some banks building societies still use traditional lending models. These they base on salary.

When they see your accounts, that salary's minuscule compared to your gross income. It raises alarm bells immediately.

Your salary, according to your accounts, is low. This will reflect in any #mortgage offer you get. That is, if you get one at all. The insecurity of short-term contracts may deter lenders from offering you any mortgage.

As a contractor, your best bet isn't always approaching a mortgage #lender direct.

You're better off going through a broker who understands contracting. They can translate your income and employment status to underwriters with your application. Here's how:
How do I find contractor-friendly mortgage lenders?

It's a fair enough question, and one we see on forums regularly. It's often borne of one of two criteria:
» virgin mortgagees looking for their first #mortgage as a contractor;
» time-honoured contractors struggling because their old self-cert mortgage has been deprecated.

Either way, the answer's pretty much the same.

First, contractors have to accept that the High St, at least for them as a niche sector customer, sucks.

Second, you need to find a lender who understands #contract-based #underwriting. Dealing with branch staff at the level Joe Public does, a contractor asking about mortgages based on their day- or annualised day-rate will instigate more questions than answers.

To save both you time (and perhaps a few bob, too) and also your chosen High St branch victim staff an awkward, buttock-jiggling moment or three, speak to a niche-specialist #broker first.

They have access to underwriters, who "get" how contracting through a limited company or an umbrella company works.

They also know what said underwriters look for in an application and how best to display your earnings to maximise the amount you can borrow.

Contract-based mortgage underwriting needn't be rocket science; but to those unfamiliar with the territory, you may as well be speaking Klingon.

Live long. Prosper. Boldly go find a stellar specialist mortgage broker who can even dispense with the Babel fish to know what you're looking for. Read on »
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The Extra Help Contractors Need to Access Relevant Mortgage Borrowing

Before the #Halifax offered IT Contractors mortgages, the landscape was a desolate place.

True, contractors could get a mortgage based on their accounts. But that route didn't make the most of their income.

We all know to how much salary and drawn dividends equate after tax-planning.

So, the figure upon which lenders worked out their affordability? It was so low as to appear demeaning.

But it wasn't only the financial side that hurt before contract-based underwriting arrived. It was also how lenders perceived risk.

Flitting between contracts was hardly the security mortgage providers needed. The credit crunch and responsible lending played heavily on underwriters' minds.

Along came Halifax with an enlightened view of contracting

The Halifax was the first to see the light. They saw how much the #ITContractors they were themselves hiring were earning.

Yet the lender also recognised the chink in their armour.

They had no mechanism in place to offer such contractors a mortgage. And that was despite said contractors' reasonable security and high day rate.

The Halifax found the solution in contract-based #mortgage underwriting. From that day until this, its their template many lenders adapt today.

Now, many other lenders offer contractor mortgages. But it's the Halifax that continues to blaze the trail. And to whom contractors will always be grateful for giving them the means to own the roof above their head.

Here's our guide to Halifax's full contractor mortgage lending criteria:
Halifax - Contractor Mortgages Done Right

We can't praise the #Halifax enough for availing contractors of mortgages using contract rates alone. The lender set the precedent more than a decade and still blaze the trail today.

Up until 2012, only #ITContractors got a look in. But as of May 2013, Halifax opened its doors to all contractors, dependent upon their day rate.

If you're interested, £312.50/day is the current minimum earning requirement for those working outside the IT sector.

For IT contractors, whose earnings really brought about the changes, there's no longer even a threshold!

We've come a long way since accounts were a prerequisite. Even moreso in 2016, when the number of contractor-friendly mortgage lenders soared to new heights.

As part of our 'Transparency' series, we turn our attention to the aforementioned Halifax, dissect their lending criteria and highlight the many reasons why their #mortgages are a good fit for higher-earning independent professionals.

If you've not got time to read it now, no worries. It's available to download as a pdf or push it to your Kindle.

There's no fee, no sign-up, no strings. Grab your guide here before we change our mind ☺ »
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When Leeds Building Society asked us to be a part of their pilot contractor mortgage scheme, we were ecstatic.

You can read more about that in our original announcement back in July, here:

What we didn't realise at the time was the size of the beast we were about to help unleash.

To say that their range of mortgages for contractors is flexible doesn't do #Leeds offering justice.

We love to see lenders come on board, but few offer their full range of #mortgage products to our community.

With no restriction on profession, a comparatively low earning threshold and mortgages that include:
• tracker;
• fixed;
• variable;
• offset
• and interest only,
Leeds Building Society covers every base for independent professionals looking to buy a home.

Interested? The full #contractor lending criteria is here:
Leeds Building Society's (extensive) mortgage lending criteria for contractors

It's our dream for all mainstream lenders to come on board with #ContractBasedUnderwriting - the affordability analysis used by savvy mortgage lenders to work out how much a limited company contractor or freelancer can comfortably borrow to buy a home.

One by one, they're tuning in. One of the latest #lenders to open its doors to contractors is the Leeds Building Society.

When Leeds BS launched the range in 2015, their team asked us to help in the pilot scheme.

We'd been knocking on their door for some time and were ecstatic when they said they were moving forward with an initial programme.

At the time, we had no idea of how wide the lender was going to swing its doors open.

The building society's now offering its entire range of mortgage products to contractors, including:

• offset;
• fixed, tracker and variable rate;
• interest only;
• commercial mortgages (buy-to-let) and HMOs.

On top of that, the lending criteria Leeds' underwriters use set no restriction on profession, have a comparatively low minimum earning threshold and offer mortgages well beyond retirement age.

After the work the Leeds team has put in, it would be rude not to at least take a look at the building society's full contractor mortgage lending criteria, which we've put together for you right here:
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Nationwide: showing the old guard how contractor mortgage lending should be today

Today, more lenders than ever want contractors' mortgage business.

Few places is the change in outlook more evident than at #Nationwide.

The lender is helping to drive a change that's sweeping through our industry.

Of course, we remain grateful to lenders who reached out to contractors under the watchful eye of "Responsible Lending".

We'll never forget their part in creating a new #ContractorFriendly environment for online mortgage brokering.

But competition had to come…
…and boy, has it?!

It's sad, but the 'salary-only' affordability calculation is still prevalent amongst the old guard #mortgage lenders.

However, lenders like Nationwide are demolishing the barriers that once prevented contractors from buying a home using their best asset: their gross contract rate.

We've now added the building society's lending criteria to our guides section to help contractor applicants get a mortgage based pre-tax day rates; it's well worth a look »
Nationwide throws its doors open wide to contractors industry-wide

So many new mortgage lenders are reaching out to contractors we may have to change our guides section into an e-book!

Nationwide Building Society is the latest lender to add its brand to the growing list of High Street mutuals opening their metaphorical doors to the contracting community.

Yes, lenders like Nationwide still prefer specialist brokers like us to vet contractors.

You'd struggle to find an in-branch advisor who understands the nuances of contracting and limited company accounts.

But what Nationwide has done is given us and other intermediaries special dispensation: we can now use their criteria to get contractors mortgages using their contract rate alone!

Accounts that in-branch advisors would ask for? GONE!

Moreover, +Nationwide Building Society has demolished some of the barriers that traditional contractor-friendly lenders ask for!

If you're on a more modest income than, say, an #ITContractor or you offer your services to a more specialised industry, it's unlikely that you'd meet the criteria of the more demanding #mortgage lenders.

#Nationwide has seen the gap and is appealing to contractors who don't fit the current mould to apply for a mortgage using their contract rate whatever it is and in whatever industry!

The lender's full criteria are now in our guides section, challenging the status quo.

Time to get down (deeper and down) and check out their refreshing offering for contractors from all walks of life:
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Mortgages with Santander for contractors? Far from as easy as 1-2-3

There's no escaping it:
- Santander is growing at an amazing pace. It's high-profile media campaign is everywhere.

With such vast resources and public outreach, you'd think that the Spanish-owned bank would cater for everyone.

In our experience, it doesn't pan out that way.

The lending criteria the bank uses can't make use of your top-line contract income.

Your net profits are likewise off limits.

Advisers can see your top line, but when they look at your 'salary'?

It's like, "Where'd all the money go?"

As a contractor, there a much better ways of getting a mortgage than with the Santander.

If you want to remortgage from a legacy Santander mortgage, perhaps a painful reminder from your permie days, you have better options using your full gross contract income.

Look for other ways to finance rebuying your home. It's really not as difficult as Santander make it out to be:
Santander mortgages for contractors: as real as fairy dust

On the residential mortgage side, few banks have grown as fast as Santander in recent years.

With 1,000 UK branches and 20,000 staff, you'd be forgiven for thinking that the bank caters for everyone.

Not so.

The only real choice contractors have at Santander is the self-employed mortgage.

Even then, this method of calculating a #contractor's affordability relies on accounts.

And after your accountant's had their way, streamlining your limited company payment structure's books for tax-planning?

They ain't gonna give Santander advisers a lot to work with.

Still, due to its presence in the media, we get contractors asking us about Santander as an option. Especially if they have an existing mortgage and are thinking of getting a #remortgage with them.

Our post looks at #Santander's failings to that end. And, despite our best attempts to work with the lender, the bank is categorically NOT what we'd call contractor-friendly.

There's a couple of FAQs answered in the article, too. They're specifically pertinent to remortgaging and if you fall into that 'have-a-legacy-Santander-mortgage-from-my-permie-days' bracket.

It's very much a case of, "Thanks, Santander, but no thanks." Enjoy (or not):
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Back in the day, #Chelsea Building Society was a leading force in self-cert mortgages.

But then the housing bubble burst, swiftly followed by the credit crunch and responsible lending.

Bye-bye self-cert and the Chelsea became next to useless for contractors looking for a #mortgage.

Fast forward to today.

Many lenders have adopted and adapted versions of #ContractBasedUnderwriting with which they're comfortable…
…but the Chelsea *isn't *one of them.

The building society's lending criteria for contractors is beyond complex.

Two years' accounts and a third year projection?
Wow! No thank you!

If the interest rates on offer were something to write home about, it might be a different kettle of fish. But again, they're so not.

Getting a decent mortgage with the Chelsea is a bridge too far for contractors. We explain why in more detail, here:
From Self-Cert to Self Destruct: Why Chelsea BS is So Wrong for Contractors

The Chelsea Building Society's recent history has been pockmarked with write-offs, mergers and then, this year, disappearing from the High Street altogether.

Yet it wasn't always that way.

Before the credit crunch, when self-cert more or less guaranteed independent professionals a mortgage, the Chelsea was a real contender.

Fast forward today - especially the last year - and you see a very different landscape.

Self-cert mortgages have bitten the dust. In their place, many lenders conscious of a growing self-employed sector, have adapted their lending criteria to accommodate flexible ways of working.

It's with much regret to report that The Chelsea isn't one of those lenders.

Yes - a contractor can get a mortgage with the building society - in theory.

But there are much better ways of getting a mortgage with contract earnings than using just the post-tax planning low salary and dividend drawings that contractors' accounts reference.

If the interest rates were über competitive, they might be worth considering.

But they're just not.

Self-cert mortgages always commanded high interest rates.

So, IMHO? #Chelsea just hasn't moved on enough from the housing boom peak to be a useful asset for a #contractor looking for a competitive #mortgage.

More details here for you:
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No More New Build Nuisance: a New Dawn w/ Just 10% Deposit!

It's pretty awesome to see just how many houses and flats developers are building. Some of you may say, "Not before time!"

Still, new construction work struggling to keep pace with deadlines means only one thing: demand for brand new homes is high!

New build houses and apartments are being snapped up before the final coat of paint is dry.

But here's the thing: lenders and developers assume that anyone wanting a new home is prepared to pay top dollar - that includes finding a huge deposit.

20% and 25% deposits are the lowest point of entry - until now.

We've brokered a deal so unprecedented, it astounds even us!
New build mortgages…
…accessible by contractors using their gross income…
…with just 10% deposit. You read it here first; now go beat the rush ►
The days of 20% and 25% deposits for new build properties are numbered

#Newbuild mortgages are experiencing something of a renaissance.

Post-Brexit nerves are settling. Government-backed mortgage schemes continue to prove popular.

But besides the usual problems a contractor faces getting a #mortgage? New-build homes pose their own unique quandaries.

Help-to-buy Equity Loan mortgages require only 5% deposit. Which is great, but they often attract crippling interest rates for added lender security.

And even if a developer's mortgage lender partner is #contractor-friendly, equally crippling 20% and 25% deposits are the norm.

So what's the answer?

How does a contractor leverage their gross income to secure a mortgage and avoid eye-watering deposits or interest rates?

Until now, options have been limited. But not any more!

We can offer contractors new-build mortgages with just 10% deposit.

And that's still using their gross contract income, not payslips and accounts, to prove affordability.

New build, new outlook, new start.

At last, you can get on the property ladder in a brand new home without having to pay through the nose to do so:
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Your 10-tip new-build survival guide… -
to help you arrive at the right decision and in your own time

How satisfying is opening the door to a new home knowing that you're the first person ever to walk over the threshold as its owner?

In theory, as a #contractor, you're in as good a position as any to buy a new home while the plaster's still settling.

But besides the usual hurdles contractors face getting a #mortgage, new-builds have unique complications.

Cashback incentives and discounts are tempting low-hanging fruit (but leave a bitter after-taste).

There are restrictions on lenders, lenders' own interpretation of #newbuild and their saturation points.

It's a minefield!

Here's our 10-tip survival guide to get you across the threshold with your sanity in tact:
To buy or not to buy? Your 10-tip guide to #newbuild mortgages

Buying a brand spanking new home can draw so many lines in the sand.

New business venture, new chapter in your family's journey or a statement of intent: what you've achieved and tipping your hat to your aspirations.

In theory, perfect. The reality? Not so straightforward.

You'll find developers in bed with #mortgage lenders who don't get a #contractor's payment structure.

Discounts and incentives hang low, tempting you to pluck them without tasting their bitterness.

They can leave a sour aftertaste that lingers in your mouth long after you commit the sin.

And deposits? Wow, they make your eyes water, too.

Our advice is simple: Don't get caught up in the moment.

Step back, look at your options and then decide.

Our 10-tip new-build survival guide will help you arrive at the right decision and in your own time:
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D-Day for landlords' tax relief changes on the horizon

Recent reports suggest that a quarter of all buy-to-let landlords have sold up.

That's before the ex-chancellor's changes to #tax #relief come into effect in April.

New rules for said relief won't allow Buy-to-Let #landlords to deduct the cost of the mortgage interest from the taxable amount.

This will make buy-to-let an untenable investment strategy for many.

Contractors may now think twice about either keeping their existing portfolio or at least trying homeownership as an investment opportunity.

Before writing if off, take a look at what the tax relief changes mean for contractors, including a comparison between now and 2020. It's quite an eyeopener!
Big changes to landlord Tax Relief begin in April 2017; what do they mean for contractors?

For contractors, rental income from buy-to-let investments have long been a great way to bolster income and carry something tangible into retirement. Even bring retirement closer, given the right market conditions.

But just over a year ago, in 2015's Autumn Statement, the then-Chancellor George Osborne dropped another of his infamous time-bombs.

Whilst many of the radical ideas he presented to the House have been defused, the changes to Landlords' #TaxRelief is still ticking, with the detonation date getting ever closer.

In the year since the changes were announced, landlords have jettisoned a quarter of all buy-to-lets!

The reason?

Under the new conditions, being a residential #landlord just won't be worth it for many, including contractors, whose investment and pensions options become seemingly fewer every year under the Tory regime. Figure that one out, if you can.

Our latest article looks at what the changes mean for #contractors, including a theoretical example set against a before and after (2020) backdrop.

If you are a landlord or are thinking of investing in bricks and mortar, don't automatically poo-poo the idea.

Seek professional advice before selling up or dismissing buy-to-let as a long-term investment.

Lenders are setting their barriers to entry higher. But that's a good thing.

All contractors' circumstances are different. Your situation may just make the ideal borrower profile to whom they can lend with confidence!
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Metro Bank: Flexible Mortgage Lending Criteria for Contractors

Once upon a time, there was a global financial crisis.

All and sundry blamed the banking system.

The FSA (as was) demanded blood and a new challenger bank.

It got both.

End of story?

Not quite…
+Metro Bank was borne of the ashes of UK Banking's reputation.

In 2010, #MetroBank launched, becoming the first new retail bank on the UK High St in 150 years.

But here's the thing.

Did we expect a bank created in the maelstrom that was Responsible Lending to cater so readily for #contractors?

Dared we hope that a new bank would offer (arguably) the most flexible #LendingCriteria we've seen for limited company and PAYE umbrella contractors to date?

No, we did not. But, yeah - we'll take it!

Oh, happy day!! Your new flexible friend is here:
Metro Bank offers what's (probably) the most flexible lending criteria to date

We love it when new mortgage lenders join the #contractor-friendly ranks.

Of late, those ranks have swelled at an unprecedented rate. It's awesome for independent professionals looking to secure a #mortgage using their contract rate.

It's easy to stand back, give ourselves a resounding slap on the back and say "job done!"

Then from nowhere, a #lender, a new bank, comes along and snaps you out of this reverie.

Yes, we have lenders who don't give a monkey's about what sector you work in.

Yes, we have lenders on board who appreciate that not all contractors earn as much as IT specialists.

We even have some extremely contractor-friendly mortgage lenders who can accommodate imperfect credit scores.

But what would happen if a new bank hit the High Street and offered all of the above and more?

Ladies and gentlemen, allow me to introduce Metro Bank.

Launched by Vernon Hill in 2010 in the fallout of global economic crisis, Metro Bank underlines its future intent with flexible, accessible lending criteria, which will help almost all contractors get a foothold on the property ladder.

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