Doing Contract Work & Mortgages

JasonHand

Hi,

I currently have my house on the market and I work full time.

Not I've recently been given the chance to do contract work where the money is more than double than I'm currently on.

My worry is once my house is sold how would contracting work affect my chances of obtaining a new mortgage? From what I understand I would need at least 6 months worth of financial information where I'd be working as a contractor.

Thankyou
Jason

Funny_old_game

Jason, you'd be looking at 18 months continuous with 6 months remaining as a thumb rule or contact a specialist contracting lender but it'll depend on your occupation and industry generally.

BarleyGB

There are a number of brokers which concentrate on contractor mortgages,

Contractor Financials in one, you can search the web for reviews on others,another website worth looking at (and using the search) is www.contractor.com or use this link to gostraight to their forums http://forums.contractoruk.com/

Depending on the proposition (LTV) some of thec ontractor brokers have arrangements with lender whereby you can get a loan based on daily rate and contract. That said lenders maybe a bit sensitive if you’ve no track record to validate theincome, i.e. suddenly wanting to borrow against double your recent income.

Usually lenders want to see 2 years accounts / SA302 (self-assessment forms),also business and personal bank statements.

Speak to one of the specialist brokers.

Mortgage_Mark_2

Funny_old_game wrote: »

Jason, you'd be looking at 18 months continuous with 6 months remaining as a thumb rule or contact a specialist contracting lender but it'll depend on your occupation and industry generally.

No, you wouldn't.

It all depends on your circumstances, you could in theory get a mortgage on day 1 of contracting.

Have a look on google for contractor mortgage specialists, and have a look at the reviews, then contact one and see what they say.

DJRogers88

Hi Mark/all,

Wonder if you can help me with a query please?
Due to my online mortgage application going wrong (their system crashed, giving me 5 DIP certificates and taking my fee's but not applying for the product!) I am having to go in branch next week to start the application again.
My girlfriend works full time and I work as a IT contractor.
I have been contracting for 6 years, with 3/6/12 month extensions, with the same client, agency and umbrella company. The latest being a 6 month extension, now 2 weeks in.

I am confused as to what figure to give the mortgage provider, as when I tick the "I am a sub co on a fixed term contract" box, it asks me to choose yes or no to the question "are you treated as an employee for tax purposes?".
The answer to this is yes, as my umbrella company process the payment, take the tax etc and pay me.

However, the next question they ask is - "What is your annual salary?"
Being paid hourly, I, nor my umbrella company can answer this.
I am guaranteed 37.5 hours per week, so looking around, the only answer I could find to this was -

Hourly rate X 37.5 X 48 weeks (presuming I have 4 weeks off per year)

From your point of view, would this look ok to the mortgage provider/underwriter?
I can prove my history with the umbrella company, have all the payslips and the umbrella are willing to give me a letter headed copy of their 'mortgage references' which show how long you've been there, how long is left on your current contract, your standard weekly hours and pay rate per hour.

Another thing is, as my umbrella company works out my pay each week in the most tax complient way etc, there are different lines on my payslip, for example -

Basic pay (number hours x NMW)
Holiday pay on basic pay
Advance - Pay Between Assignments -
Holiday pay on advance of PBA -
Commission -
Holiday pay on commission -

Is this likely to be a problem? First time buyer stress :huh:

Forgot to add - its a 200k house and our deposit size means it will be around 70% LTV

Mortgage_Mark_2

DJRogers88 wrote: »

Hi Mark/all,

Wonder if you can help me with a query please?
Due to my online mortgage application going wrong (their system crashed, giving me 5 DIP certificates and taking my fee's but not applying for the product!) I am having to go in branch next week to start the application again.
My girlfriend works full time and I work as a IT contractor.
I have been contracting for 6 years, with 3/6/12 month extensions, with the same client, agency and umbrella company. The latest being a 6 month extension, now 2 weeks in.

I am confused as to what figure to give the mortgage provider, as when I tick the "I am a sub co on a fixed term contract" box, it asks me to choose yes or no to the question "are you treated as an employee for tax purposes?".
The answer to this is yes, as my umbrella company process the payment, take the tax etc and pay me.

However, the next question they ask is - "What is your annual salary?"
Being paid hourly, I, nor my umbrella company can answer this.
I am guaranteed 37.5 hours per week, so looking around, the only answer I could find to this was -

Hourly rate X 37.5 X 48 weeks (presuming I have 4 weeks off per year)

From your point of view, would this look ok to the mortgage provider/underwriter?
I can prove my history with the umbrella company, have all the payslips and the umbrella are willing to give me a letter headed copy of their 'mortgage references' which show how long you've been there, how long is left on your current contract, your standard weekly hours and pay rate per hour.

Another thing is, as my umbrella company works out my pay each week in the most tax complient way etc, there are different lines on my payslip, for example -

Basic pay (number hours x NMW)
Holiday pay on basic pay
Advance - Pay Between Assignments -
Holiday pay on advance of PBA -
Commission -
Holiday pay on commission -

Is this likely to be a problem? First time buyer stress :huh:

Forgot to add - its a 200k house and our deposit size means it will be around 70% LTV

Which lender are you going with, what is your hourly rate and which umbrella company do you use?

They are vital pieces of information that could scupper the whole application.

My advice would be to speak with a contractor specialist broker ASAP to make sure you don't have your application assessed incorrectly as that could hamper your chances full stop - going direct like you are can be very, very problematic with umbrella companies as not all lenders will take into account all of your payslip income - you need to make sure you're using a lender who will use your contract, not the payslips.

You aren't employed at all, you're a contractor. Declaring yourself as employed will be incorrect as you are not permanently employed by the umbrella company, and that would then trigger the request for payslips, making the whole thing fall down (potentially).

Cancel the in-branch appointment ASAP and contact a contractor specialist broker, they will almost certainly be able to help by the sounds of it but it will be money well spent if they can take the stress out of your situation and stop you approaching a lender who will categorically not lend.

DJRogers88

Hi Mark,

Thanks for the response.

Nationwide / PH and Parasol are the answers to the first question.

I have never declared myself employed at any point throughout the application process. As I mentioned, Nationwide's own calculators asked if I was employee/subco etc. I chose Sub-Co Fixed Term.
Next question is, are you treated as an employee for tax purposes (EG via umbrella company). So I chose yes, if you choose no, it treats you as self employed and asks for yearly profit, which is wrong. I spoke to Nationwide direct, who told me they would just work it out from the payslips. The lady I spoke to in branch also didn't think it would be a problem.... what do you think now I've explained the above?
Thanks

Mortgage_Mark_2

DJRogers88 wrote: »

Hi Mark,

Thanks for the response.

Nationwide / £21 PH and Parasol are the answers to the first question.

I have never declared myself employed at any point throughout the application process. As I mentioned, Nationwide's own calculators asked if I was employee/subco etc. I chose Sub-Co Fixed Term.
Next question is, are you treated as an employee for tax purposes (EG via umbrella company). So I chose yes, if you choose no, it treats you as self employed and asks for yearly profit, which is wrong. I spoke to Nationwide direct, who told me they would just work it out from the payslips. The lady I spoke to in branch also didn't think it would be a problem.... what do you think now I've explained the above?
Thanks

My advice of speaking to a specialist broker still stands, even though what you think is a logical answer is being entered on the application - it could well be that is the wrong option; a broker will have the guidance of their relationship manager to ensure that it is presented correctly and minimises the risk of any issues.

Nationwide's criteria for umbrella contractors are that you need to have been working on that basis for a minimum of 12 months, or have 24 months remaining on your contract, of which they will need a copy.

What I'm trying to say is that even though you 'fit' that criteria, there are many weird and wonderful quirks with lender systems that mean that there is always the potential for something to be entered incorrectly (as I'm sure many of the other brokers will attest to!). They don't always, for example, take into account 100% of commission payments.

Either way, if you do decide to press on directly, stay on top of Nationwide from day one to ensure that they are in fact processing it correctly.

kingstreet

FWIW I'd go nowhere near Nationwide with this case for one of my clients.

Mortgage_Mark_2

kingstreet wrote: »

FWIW I'd go nowhere near Nationwide with this case for one of my clients.

Depends on other aspects but there may not be a plethora of other options.