Agency contract

noisla

I have had mortgages agreed in principal in 2010 and 2011 (but each time the flat fell through :-( ). After a year off from flat-hunting, I have now started again, but the banks are now telling me I can't get a mortgage, as my current job is paid through an agency.

They say I would need to show evidence of having a contract renewed. However, my contract is just ongoing, so it will never be renewed. Other contractors have been there 2-3 years, and the company cannot offer any permanent contracts until the headcount KPI freeze is lifted by their US parent. I could switch to setting up my own umbrella company rather than being paid (via PAYE) through the agency (please ignore the tax/IR35 implications for the purpose of this post), but it seems then I would need to show 2-3 years' worth of accounts in this case, prepared by a chartered accountant (me).

This is really frustrating. My mortgage repayments would be less than my rent, and in the meantime, inflation is erodes savings. Is there anything I can do?

When I got mortgages before, I was never asked to produce my employment contract, only past payslips, and I don't recall anyone ever asking about my notice period (which was 1 month then, and 1 day now). If I don't volunteer any information about my employment contract myself, would a lender even ask?

For information, I was looking to buy a flat at £120k, borrowing £80k and deposit £40k, with gross income of £65k. I pay approx £200 a month to a student loan of £3.5k, no other debts, dependants nor bad credit history.

Thanks for your thoughts!

harvey115

You need to speak to a broker for this as almost all high street lenders would stick with less risky clients whose incom is easilly visible.

I am also a contractor but running my own ltd company. I completed on my mortgage end of Septemebr through www.contractmoney.com, get in touch with them. Hopefully you will find something.

noisla

Well I've concluded that I'm unlikely to get a mortgage anytime soon (if ever), but I'd like to give myself the best chance of being considered in a couple of years.

For this couple of years, could anyone advise as to whether it would be better to be paid via an agency under PAYE, or whether I should set up my own company?

The company I work for are happy for me to do either. Some banks say they just won't touch agency workers at all, whereas the self-employed can provide 2-3 years worth of accounts. I don't really understand why it makes any difference, when the job, pay and notice period are the same, just a different legal framework / tax status.

Dave_Ham

I believe this can be sorted now, just need to approach the right lender.

Chances are this will need to be via a broker.

Best of luck

Conrad

Some brokers will suggest you approach a lender that only requires payslips and for you to not mention the contract issue and just pretend you are employed.

By all means do so, but make sure you nrecord the interview in case the broker gets caught out - many are being caught for this sort of thing just now.

Dave_Ham

And some brokers will actually approach the right lender, given the circumstances and get the right end result done the right way.

harvey115

Yes as there are crooked brokers so are there very professional ones as well who know the market and lending policies and go by the rules rather then hiding the truth.

To be honest if you follow your common sense and you feel that the broker is playing up, you should double check things and make them clearer with the broker. I was lucky to get in ouch with highly professional people and I could say through out the process I did not doubt that anything was misunderstood or misrepresented to the lender on my behalf. Plus the experienced people on this forum is an excellent help as well.

noisla

Just thought I'd add an update, as I've had some surprising advice from my bank. I had a meeting with a mortgage adviser at Santander, who frustratingly was only qualified to take me through their online affordability tool (again) and couldn't answer any of my questions about drawing up accounts - a complete waste of a morning off work. However, a more useful chap did call me later.

He said that in drawing up 2 years' worth of accounts, I could include all types of income e.g. employment income, savings income and, as applicable to the legal status of my current 'self-employed' status, trade (DI) income, partnership (DI) income and/or income (dividends/salaries) from my own company. This means I can draw up accounts right away covering the last 2 years, as there is no need to wait until I have 2 years of the same type of income.

Further, he said the bank do not actually want you to send in any accounts, there is just a form to complete, which needs to be signed by your certified account. (Hopefully this can include chartered accountants.) In fact he said the bank rarely even check the form, they just need it back signed. I now have this form. It only has boxes for sole-trader (DI) income, partnership (DI) income and dividends/salary taken from your own company. I will consult with my accountant but I guess I will shoe-horn my employment income in somewhere and annotate the form appropriately - as long as it's 'true and fair' and all material facts are disclosed, I guess.

Finally, I queried the basis on which I should draw up the accounts. For example, under UK GAAP, IFRS, small companies standards, etc. All he could tell me was that they often accepted financials drawn up for the purposes of a self-assessment tax return. This therefore means on the basis of the relevant taxes act e.g. Income Tax (Trading and Other Income) Act 2005. This is even better for me, as it will allow me to place value on the considerable benefits I received in my last job, which significantly increased my taxable earnings.

I am still sceptical that I'll get accepted for a mortgage, and the flat I wanted has been sold, but I am enjoying the challenge of jumping through the hoops! Now to start pouring over the taxes acts...

Thrugelmir

noisla wrote: »

Now to start pouring over the taxes acts...

Not sure that this is going to assist your cause greatly. Given your employment status is currently what it is.

noisla

The message I took was, that if I can get the figures to add up, and stick them in some boxes on the form, that's fine. The bank don't care where the figures come from or how they've been calculated. (Obviously I won't lie and I will adhere to ay rules written on the form or told to me by the bank.) There's not even a requirement for a UK *chartered* accountant to sign the form off - anyone with any sort of certificate in accounting will do.

Anyway, the proof is in the pudding. I'll post an update once I've applied, but it will take me a while to collate all the paperwork I need to draw up the accounts.

Dave_Ham

Are we still talking about Santander?