Contractor Mortgages

sirhan_sirhan

Apologies for raising a question that I know has been asked before, but the mortgage market seems to be onstantly evolving, and so things might have moved on. My circumstances are also a little different to others that I have seen raised.

My situation - I have recently moved from a permanent position (same company for over 10 years), to a contract role. I was spoiled for choice when it came to which contract I took, as I had three simultaneous offers. My contract is initially for 6 months, although I anticipate that renewal for a further 6 months will not be an issue at all. My earnings annualised, after holidays etc, are around £100k pa.

I have savings of around £200k. I am guessing that any mortgage that we need will be no more than £200k, thus we have a 50% deposit.

I went to see a high st building society in the week regarding mortgage options (we rent at the moment), but was told that I would not be eligible until my contract had renewed twice (ie another 12 months down the line).

My question is, am I going to find this problem everywhere? I have a very high deposit to loan, I have a very high disposable income, and my services would appear to be highly sought after. I would have thought that I would be a good prospect for any lender, so am surprised at the initial reaction.

If I am going to get this problem everywhere on the high st, are there any specialist brokers out there that I should be seeking out?

Any advice would be gratefully received.


Thanks in advance.

poolboy

actually I am not surprised. I asked my bank who I have banked with for 20 years for a small mortgage (like 25% of the house value) & got nothing.
They wouldn't count any property based income - which is pretty much my total income!

Seems they got their fingers burnt & aren't going to repeat it.

sirhan_sirhan

OK, thanks.

So presumably this will apply to the whole of the high street lenders? Did you have any joy with brokers?

I have approached a broker that appears to specialise in contractor mortgages, it will be interesting to see how I get on.

AJ1982

If you visit http://www.contractorcalculator.co.uk/ there is some discussion there about mortgages, along with ideas on which brokers to use...

sirhan_sirhan

Thanks AJ, for some reason though that site seems to be blocked from the office! Will have to look at home later.

The broker that I have initially approached is Contractor Financials.

Thanks again.

ItMightBeUsefulOneDay

Hi Sirhan,

It looks as though you've found the truth beneath all the lies and political spin - the zombie banks, bailed out by us the tax-payer, don't really want to lend. So they are cherry picking the very best customers to balance out their previous reckless lending and shore up their fat-cat end-of-year bonuses.

You'll find that contractor means self employed. Self employed means high risk. High risk means no chance of even being considered.

If you're an IT contractor (assumed from your salary) then you may be able to find more a sympathetic specialist mortgage by going through a broker or asking, "Do you do mortgages for IT contractors". I think some do and those will take account of just your IT contract rather than insisting on 2 years of detailed books.

AJ1982

Hmm, blocked, I wonder why :P Its a good site though, got the odd bit of advertising on it, but nothing excessive. I am thinking about the contract route and have spent days on the site reading up.

Is there a way you can PAYE your salary (i know you will pay more tax) to receive more salary, than dividend, so it seems more favourable to employer... Or if ur raking in that amount (ps u lucky swine) cld it be a year or so wait to save up?

sirhan_sirhan

Hi AJ,

Site working from home now, and there is some interesting info there, thanks. Seems that the broker they point to is the one that I found earlier: Contractor Financials. They have been quite good with the communications today, and have approached an underwriter to sound him out about my position.

No big deal if we have to wait 6 months, or even 12 months; I don't think the market is going to roar away. It would be good to know exactly what our position is though.

Regarding contracting, I wish I had tried it years ago. I had a pretty good permanent role, but contracting just seems like a licence to print money. I am going via the umbrella route, which is not quite so tax efficient, but it removes alot of the PAYE and other red tape hassle. I am using a company called Cloud9, who seem ok, early days yet though.

When weighing up the contracting option, remember to take into account the tax breaks on travel costs, lunches etc; it makes a big difference.


Thanks, and good luck.

Thrugelmir

sirhan_sirhan wrote: »

When weighing up the contracting option, remember to take into account the tax breaks on travel costs, lunches etc; it makes a big difference.

Business expenditure is tax deductible. However it also reduces net profit for calculating lending for mortgage purposes. So don't get carried away with those lunches.

PS. Even expenditure on lunches (subsistence) has to be reasonable. As the HMIT can disallow for tax purposes if excessive.

sirhan_sirhan

Quick update for those of you interested -

Contractor Financials have come up with a number of options for me to select from; my pick of the deals is an Offset from the Woolwich at base rate + 2.39%.

Seems like a good deal, am likely to go with this if we do chose to buy in the near future.

Excellent communications from CF, I am very impressed so far.