First-Time Buyer Contractor Mortgage

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Buying your first home is a big milestone, and it can take a lot of research to understand all the steps in the process. As a contractor, there is a lot to consider in getting a good mortgage deal. We are here to help make sure everything goes smoothly.

Tips for Contractors buying for the first time

When you are preparing to buy a home, it helps to get everything organised in advance. Some key things to consider include:

  • Talk to a broker – we’ll help set your property budget and get you an Agreement in Principle from a lender.
  • Credit report: find out your credit score and make sure you’re registered to vote, both things that lenders will check.
  • Get your deposit together: you will have more mortgage choice if you have at least 10% of the purchase price.
  • Look at government schemes to see if they might help you buy a home
  • Speak to your accountant to get tax and accounts in order.
  • Be able to provide six months’ worth of personal bank statements,
  • Add up additional expenses and make sure you have them covered. These include legal costs, surveys, furniture and re-decorating.

How do I find the most appropriate mortgage?

Securing a mortgage shouldn’t be a problem if you have a good deposit saved up and have been working as a contractor for 12 months or more.

It’s a good idea to consider the different types of mortgage available – for example, whether you would prefer a fixed rate or variable rate deal. Many First Time Buyers prefer the predictability of a fixed rate mortgage – although you may find lower interest rates with a variable deal.

A mortgage broker can help you explore the options and discuss the pros and cons of each type.

How much will I be able to borrow?

Lenders will look at your income and outgoings when assessing how much to offer you. To get a good mortgage offer, you will need to prove to the lender that your income is reliable.

For a contractor, the way that lenders will assess your income can vary. Some will accept your contracting day rate as your income, while others will look at your accounts and assess your application based on your stated salary and dividends.

With some lenders, therefore, your loan amount will depend on how your business has performed in the past year or two. Other lenders will look at the contract you have at the moment, what it’s worth and how long it will last.

A good mortgage broker will select suitable lenders based on your situation, to find a product that will work best for you.

Speak To An Expert

Our team of experts are experienced in catering for a range of clients, needs and property types. With a vast array of qualifications and accreditation from the financial accreditation agency you can be confident of quality service and sound advice.

How are contractors assessed by mortgage lenders?

How your business is set up can often dictate how the lender will assess your mortgage application and the documents they will want to see.

Contractors working as a sole trader

Sole traders usually need to supply one to three years’ self-assessment forms, and take an average annual income from these.

Fixed term contractors on PAYE

For a fixed term contractor on a monthly salary, a lender may assess you on your day rate. You will usually have to prove that you’ve been contracting for at least six months and you have at least another six months left on your current contract.

Limited Company contractors

If you run a Limited Company lenders usually request one to three years’ certified financial accounts. Most will take your income as the stated salary plus dividends, but some will include the net profit in your business too.

Contractors working for an Umbrella Company

If you work under an Umbrella Company, lenders usually ask for payslips and details of your working history. It helps if you’ve had your contract renewed with the Umbrella Company.

New contractors

If you’re a new contractor, seek advice. Many lenders will want you to have been contracting for at least 12 months, but a broker may be able to find a specialist lender that will give you a First Time Buyer mortgage based on your specific situation.

What deposit will I need?

The bigger the deposit you have to put down, the more choice you will have of both lenders and products. A 10% deposit is the average, but if you can raise 15% or even 20% you can usually find better interest rates, which will reduce your monthly mortgage repayments.

The offers you will get from lenders can vary widely, so it’s good to compare many options – or get a broker to do that on your behalf.

How can The Mortgage Co help me get a Contractor Mortgage?

We specialise in mortgage advice and are here to take the stress out of getting a mortgage. We’ll get to know you and your specific situation to find the most competitive and suitable deals on your behalf. We will compare dozens of options across high street and specialist lenders, and recommend the most appropriate way to achieve your property goals. Having a broker on your side will vastly improve your experience as a First Time Buyer.

Hardisty Financial Ltd trading as Mortgage Co. is registered in England and Wales and authorised and regulated by the Financial Conduct Authority.  Contact our registered office for an initial chat today.


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