As a contractor, you can work much more flexibly than permanent employees. You’re also in charge of your own earnings and can scale your work up and down as you need to.
But while there are lots of benefits to being self-employed, there are some downsides – including the extra hoops you’ll have to jump through to remortgage your property.
Despite the fact that today’s mortgage providers are generally much more willing to lend to contractors, you’ll need to make sure you fit your preferred provider’s eligibility criteria before you apply with them. You’ll also need to prove that you are financially secure and you’re capable of earning enough to cover your monthly repayments and all your other expected outgoings.
When do you need to remortgage?
Remortgaging a property is the process of applying for a mortgage with a new lender without physically moving between locations.
There are a few reasons why you may be considering remortgaging your property. Maybe you simply want to get a better deal and take advantage of cheaper rates elsewhere. Perhaps you need to raise money for home improvements and other large purchases. You can do this by releasing cash from your existing mortgage and upping your monthly repayments or the length of their mortgage term as part of a revised agreement.
Remortgaging can also be a way to consolidate other existing debt and pay it off within your monthly mortgage payments. However, although interest rates on mortgages are often lower than on personal loans, you could end up paying more overall if you choose to take the mortgage out over a longer term.
If you’re looking to remortgage your property, the cost of your new agreement will be one of the biggest factors in your decision-making process. But there are other things to think about – such as whether the mortgage is portable, whether the lender will allow you to overpay on your repayments, what the exit fees are, and whether the term length suits your needs.
How can being a contractor affect your chances of getting a new mortgage?
If you’re a contractor and you want to qualify for a mortgage, you may find that lenders will ask you for around three years of accounts. This can cause big issues if you haven’t been contracting for this amount of time, or if you draw out your income via company dividends, as this will make your net income average look low.
Lenders can sometimes be hesitant to offer credit to contractors. Many companies believe that a contractor’s employment status is not completely secure, and steady income is not guaranteed. And while your earnings aren’t factored into your credit score, your debt-to-ratio income will have a huge bearing on your rating, so your overall financial health needs to be taken into consideration, too.
While the mortgage landscape has changed a lot over recent years, many High Street lenders are still not making it easy for contractors to remortgage. That said, there are specialists in the market who are more than happy to take a view on your circumstances and provide solutions, not barriers.
At CLS Money, we work with a range of brokers who are dedicated to helping contractors like you find the right mortgage for their circumstances. Depending on how well you meet our specialist lenders’ eligibility criteria, we may even be able to source a deal that is just as competitively priced as an agreement that’s available to permanent employees.
Why use a mortgage broker?
Don’t limit your choices by sticking with High Street banks and big-name lenders. Contact CLS Money for help exploring your options with providers who are willing to assess your case on its own merits.
During your free initial consultation, we’ll chat with you at great length about what you’re looking for from your new mortgage before searching the whole of the market for a deal that fits the bill. From there, we’ll present you with a series of quotes and help you select the product that best suits your requirements.
Get in touch now to get the ball rolling. We’re available over the phone, online, or in person, and we’ve got plenty of evening and weekend appointments available.