Mortgage for contract worker

serious_saver

I've been told by quite a few people that freelancers need 2/3 years accounts to get a mortgage.

I would like to know if there is any flexibility in this if you have a good deposit and what is the best way of going about getting one?

serious_saver

A bit more about my situation

I have been working as contract worker for the same company continuously for the last 12 months. Before that I was on a training scheme directly related to my current role and before that I had a nice civil service job.

In January I will be getting a 6 month contract. It’s the longest they can give me at the moment but I will be moved from their casual staff list onto the employee list. From then I will have the chance to get longer contracts and eventually transfer to permanent staff job. Where I work that’s a pretty impressive achievement as longer contracts a hard to come by. I will be he first ‘new’ person taken on by the company in my role for over 5 years and I’m fairly confident that I will have no problem with continuing work.

I have taken a pay cut in order to get the contract which will give me about £22,000 per annum with a review after 6 months.

We have a £40,000 deposit from savings (should be able to push it up to £45,000 by March at the latest) and would like to buy a house for around £170,000 so we would need a mortgage of £125,000. I think the LTV on that would be pretty good.

My OH is employed full time and gets £15,000 per annum. He should be getting a pay rise that will take him up to at least £19,000 but we don’t want to take that into account until he’s actually getting it as his company have been known to make promises but not follow through with them. Obviously with his pay he wouldn’t be able to get a big enough mortgage on his own.

I'm also in a bit of a funny situation as I've always been paid PAYE rather than going Schedule D which means I don't fill in tax returns and keep detailed accounts like many of my colleagues.

sonastin

Looking at your numbers, I think you might be pushing things a bit. You're looking at a salary multiple of more than 3 x your combined income and a deposit just touching 25%. With a solid employment history you would probably be able to convince the banks to lend based on affordability but the lack of accounts / permanent contract makes you a more risky proposition.

The old-fashioned rule of thumb was 3 x a single salary or 2 x combined salary for a couple. That sort of criteria has been thrown out of the window in recent years but I think mortgage lenders are tending to head back towards their comfort zone. If you were looking to borrow a lower multiple of your income or had a much bigger deposit (25% is the minimum for banks to be "comfortable" in my opinion!) then they may be willing to take a risk on your employment record. At the moment I think you are a little too close to the borderline.

Hammyman

No. I've been self employed for a good few years with accounts. When getting the mortgage for this house, even with a 25% deposit it had to be done in wifeys name as she has a permanent job.

dizziblonde

Hammyman wrote: »

No. I've been self employed for a good few years with accounts. When getting the mortgage for this house, even with a 25% deposit it had to be done in wifeys name as she has a permanent job.

Same - I do a mix of contracts, casual and all sorts - my income just didn't exist for mortgage purposes.

poppysarah

Save the biggest deposit you can and buy a house as cheaply as you can.

I'm seeing people offering 10% off current asking prices at the moment in my area - and suspect the discounts will keep on coming.