Contractor/self employed options

Mortg76

Hi - currently my wife and I have a mortgage with Nationwide. We would like to move in 18 months/2years . We will have a substantial deposit as by then we will almost own our home outright. My wife is in permenent work in a managerial role .

I am soon about to move into a contractor role. I am of the understanding this could be as self employed or as a Paye contractor . My earnings over a year will be around 30,000, but my work may be for 7/9 months a year only. Contract to contract , or self employed.

Does anyone have any experience with contracts like this? My understanding with nationwide is that fixed contract mortgages require 12mnths minimum of repeated contracts before mortgage will be considered. I will rarely be offered a 12month contract as the work is quiet in Nov/Dec/Jan so 9mnths on a regular basis is the best I can achieve . I will however be able to provide consistant repeated contracts with the same company in the future.

So any advice appreciated... I am at this stage assuming self employed is better as the amount earned will be spread over the financial year and periods of low work activity will not effect mortgage chances? But is fixed contract work with breaks actually an ok route as well?

Thrugelmir

Mortg76 wrote: »

But is fixed contract work with breaks actually an ok route as well?

You may well need an established history that supports this assertion. No lender is going to base a decision on your word alone.

Mortg76

Thrugelmir wrote: »

You may well need an established history that supports this assertion. No lender is going to base a decision on your word alone.

The Mortgage application will be in 18 months - 2 years. By then I will have records of work , signed contracts and accounts but they will not be continuous . There will be a pattern to it but with breaks between contracts.

Let_Us_See

Mortg76 wrote: »

We will have a substantial deposit as by then we will almost own our home outright. My wife is in permanent work in a managerial role.

As you hint the required mortgage will be small why not use your wife's income only?

Mortgage_Mark_2

Mortg76 wrote: »

Hi - currently my wife and I have a mortgage with Nationwide. We would like to move in 18 months/2years . We will have a substantial deposit as by then we will almost own our home outright. My wife is in permenent work in a managerial role .

I am soon about to move into a contractor role. I am of the understanding this could be as self employed or as a Paye contractor . My earnings over a year will be around 30,000, but my work may be for 7/9 months a year only. Contract to contract , or self employed.

Does anyone have any experience with contracts like this? My understanding with nationwide is that fixed contract mortgages require 12mnths minimum of repeated contracts before mortgage will be considered. I will rarely be offered a 12month contract as the work is quiet in Nov/Dec/Jan so 9mnths on a regular basis is the best I can achieve . I will however be able to provide consistant repeated contracts with the same company in the future.

So any advice appreciated... I am at this stage assuming self employed is better as the amount earned will be spread over the financial year and periods of low work activity will not effect mortgage chances? But is fixed contract work with breaks actually an ok route as well?

As a contractor-specialist broker, yes, I do have some experience with this!

Firstly, forget Nationwide - they will require you to have been with the same client/employer for at least 12 months, so that will probably be a non starter.

There are lending options for people who have been contracting for less than 12 months certainly, subject to income/job role and LTV.

Biggest advice I can give you from a mortgage point of view if you're starting to contract shortly - keep gaps to a minimum. If you're planning on only working for 9 months of the year, you WILL have difficulty in obtaining a mortgage based on your contract rate and will almost certainly have to wait until you have 2 years of accounts (self-employed/LtdCo - if it's PAYE you will struggle even with a couple of years of history).

Speak with a broker as they will have a far better knowledge of which lenders will and won't look at you in the right way.

Good luck

Mark

Mortg76

Let_Us_See wrote: »

As you hint the required mortgage will be small why not use your wife's income only?

The mortgage will not be small as we are wanting to borrow as much as viable to move to a better area. We are both going to be on around £30k a year and would like to borrow around £200k. We will have around £160k from our home when we sell. So looking to purchase around the £350k mark price wise

Mortg76

Mortgage_Mark wrote: »

As a contractor-specialist broker, yes, I do have some experience with this!

Firstly, forget Nationwide - they will require you to have been with the same client/employer for at least 12 months, so that will probably be a non starter.

There are lending options for people who have been contracting for less than 12 months certainly, subject to income/job role and LTV.

Biggest advice I can give you from a mortgage point of view if you're starting to contract shortly - keep gaps to a minimum. If you're planning on only working for 9 months of the year, you WILL have difficulty in obtaining a mortgage based on your contract rate and will almost certainly have to wait until you have 2 years of accounts (self-employed/LtdCo - if it's PAYE you will struggle even with a couple of years of history).

Speak with a broker as they will have a far better knowledge of which lenders will and won't look at you in the right way.

Good luck

Mark

Thanks this is the very helpful. In your opinion if I am given a choice is self employed a better option? I will have little choice about the length of gap in contract as that is the nature of the work. Until investigating this I had considered paye the prefered option intially as I could show consistant , repeated work with the same employer and written confirmation that this would be ongoing . I have also taken Nationwide at their word that although it is not a common mortgage application, as we are good clients they would do everything (through underwriter) to keep us with them. Should I take this with a pinch of salt? All advice welcome and very much needed.

movilogo

If you are planning to get a mortgage, I'd advise to move to a perm role (if that is at all feasible).

In general, you need to show 2 years a/c statement for self employment.

If you are on perm job, most lenders will offer you mortgage as long as you have worked in same job at least 6 months (satisfying all other criteria).

Mortgage_Mark_2

movilogo wrote: »

If you are planning to get a mortgage, I'd advise to move to a perm role (if that is at all feasible).

In general, you need to show 2 years a/c statement for self employment.

If you are on perm job, most lenders will offer you mortgage as long as you have worked in same job at least 6 months (satisfying all other criteria).

First piece of advice: ignore this ^. Contracting is not 'self employment'.

Mortgage_Mark_2

Mortg76 wrote: »

Thanks this is the very helpful. In your opinion if I am given a choice is self employed a better option? I will have little choice about the length of gap in contract as that is the nature of the work. Until investigating this I had considered paye the prefered option intially as I could show consistant , repeated work with the same employer and written confirmation that this would be ongoing . I have also taken Nationwide at their word that although it is not a common mortgage application, as we are good clients they would do everything (through underwriter) to keep us with them. Should I take this with a pinch of salt? All advice welcome and very much needed.

I'm not entirely sure how much discretion Nationwide underwriters have; their criteria is very strict around contractors and I doubt they would have sufficient leverage to sidestep too much.

I can't advise whether dealing with your own tax affairs would be more beneficial, this really is a question for an accountant, however mortgage options are largely the same (depending on which route you mean by 'PAYE' contracting and whether you mean a tax-efficient umbrella scheme).

Take your point re: gaps however just a heads-up, lenders who would be willing to lend based on contract value will not do so if you have any more than 6 weeks in any of the last two years, unless there is an exceptional reason for the gap (maternity leave etc).

Mortg76

Mortgage_Mark wrote: »

I'm not entirely sure how much discretion Nationwide underwriters have; their criteria is very strict around contractors and I doubt they would have sufficient leverage to sidestep too much.

I can't advise whether dealing with your own tax affairs would be more beneficial, this really is a question for an accountant, however mortgage options are largely the same (depending on which route you mean by 'PAYE' contracting and whether you mean a tax-efficient umbrella scheme).

Take your point re: gaps however just a heads-up, lenders who would be willing to lend based on contract value will not do so if you have any more than 6 weeks in any of the last two years, unless there is an exceptional reason for the gap (maternity leave etc).

Ok, so if payee is not very viable , can you tell me from experience what you think our chance of success is in the following senario :

Me : 2 years self employed 30,000 (gross) PA 1st year 35,000 (gross)PA 2nd year,
Wife: permanent employment 30000 PA
Loan : 200,000
Deposit :150,000

We have no bad credit and very few extra expenses ,would this be a a 50/50 call or would most banks accept this? I ask also because there is clearly quite a difference between meeting criteria to be considered and actually being accepted .