mortgages for a contractor

directdebiter

Hi just quickly researching for mortgages as a limited company director / contracting and saw some historic posts on here as I want to use a contracting specialist.  I saw that "CMME" was mentioned on here but checked contractoruk to see who they recommend https://www.contractoruk.com/money/contractor-mortgages.html and it is a company called freelancer financials - not seen them before. So before I call around just seeing if there is any advice / suggestions I can gain

- does anyone recommend a good broker (by good I mean responsive and good customer service)
- do all of these specialist brokers charge a fee? 
- what is the norm for now for understanding borrowing potential? Is it 2 years accounts? (from what I have read)

thank you in advance for any personal experience or suggestions. 

K_S

directdebiter said:

- what is the norm for now for understanding borrowing potential? Is it 2 years accounts? (from what I have read)

@directdebiter Generally speaking, you need 2 years' accounts to potentially access a wide range of lenders. There are a couple of lenders who will consider 1 year accounts but expect to subjected to a lot more scrutiny and other criteria requirements.

To get an idea of maximum borrowing for ltd.co. income, it differs across lenders and depends on how you want it looked it. If you extract all the profits, sal+divs might be best for you, if you retain some of your profits within the ltd.co., then you want a lender who will look at sal+profit, etc.

To get a very general idea, might be worth playing around with a few lender calculators to see what comes up.
https://online.accordmortgages.com/public/mortgages/quick_enquiry.do
https://www.nationwide-intermediary.co.uk/calculators/affordability-calculator

Grumpy_chap

directdebiter said:

Hi just quickly researching for mortgages as a limited company director / contracting and saw some historic posts on here as I want to use a contracting specialist.  I saw that "CMME" was mentioned on here but checked contractoruk to see who they recommend https://www.contractoruk.com/money/contractor-mortgages.html and it is a company called freelancer financials - not seen them before. So before I call around just seeing if there is any advice / suggestions I can gain

- does anyone recommend a good broker (by good I mean responsive and good customer service)
- do all of these specialist brokers charge a fee? 
- what is the norm for now for understanding borrowing potential? Is it 2 years accounts? (from what I have read)

thank you in advance for any personal experience or suggestions. 

AIUI, you will normally need two-full years accounts so need to be in the third year of trading.

A Broker is the best way to go forwards to get good advice and a competitive deal.

I cannot recommend any Broker because I simply do not have the knowledge or experience to do so.  I am not sure that this forum would even be the correct place to make such a recommendation.  More a place for suggesting what to look for when choosing a Broker, rather than specific Broker recommendations.

FWIW, I understand that CMME was (or may still be) mentioned in the Costco referrals.  Does that mean that Costco assessed the skills and competency of CMME?  Does it just mean that CMME paid Costco a significant lump of money by way of advertising or introducers fee?

Likewise, I would ask the similar question of any other contracting website seemingly promoting the benefits of one company over another.

amnblog

Any sensible broker should be able to sort this for you. Expect to pay a Broker Fee, this is not the realm of the fees free broker.

If you do not have two years tax returns there are still some lenders that will work off of your day rate. Depending on the circumstances.

propertyhunter

I've not had a problem getting a mortgage as a contractor from L&C - but I am a vanilla case (no debts and high deposit). I had two years' accounts, with dividend income only for my first mortgage and got a good deal. All three mortgages I've had as a contractor have been with high street lenders - for example, Halifax, Coventry BS. They were all willing to lend 4.5x dividend income, but I didn't need that amount of borrowing. I will for my next purchase (sigh). 

london21

If you have been contracting for at least 1 year, Metro bank or Clydesdale bank might be able to use daily rate to offer you a mortgage. 

kingstreet

When we (brokers) talk about contractors we are talking about using gross contract value/daily rate in affordability not salary/dividends nor self-employed net profit. This allows earlier applications and often higher maximum borrowing amounts. It can also help with IR35/umbrella company planning.

K_S

kingstreet said:

When we (brokers) talk about contractors we are talking about using gross contract value/daily rate in affordability not salary/dividends nor self-employed net profit. This allows earlier applications and often higher maximum borrowing amounts. It can also help with IR35/umbrella company planning.

@kingstreet I'm only a one-person band so not a huge sample but I've found criteria to be moving the other way, treating ltd. co. contractors as self-employed vs day-rate calcs, especially since IR35 has been tightened and contractors who can still operate within a ltd.co. are being more ad-hoc and flexible with how many days they work and how many clients they have. But that could just be the cases that have come my way.

kingstreet

K_S said:

kingstreet said:

When we (brokers) talk about contractors we are talking about using gross contract value/daily rate in affordability not salary/dividends nor self-employed net profit. This allows earlier applications and often higher maximum borrowing amounts. It can also help with IR35/umbrella company planning.

@kingstreet I'm only a one-person band so not a huge sample but I've found criteria to be moving the other way, treating ltd. co. contractors as self-employed vs day-rate calcs, especially since IR35 has been tightened and contractors who can still operate within a ltd.co. are being more ad-hoc and flexible with how many days they work and how many clients they have. But that could just be the cases that have come my way.

Admittedly you do have complications, for example where there's more than one shareholder in the Ltd Co or there's more than one contractor employed; but there are still plenty of options especially for IT Contractors and £75k+ incomes.

IdrisJazz

I have used a mortgage broker in your position. It is the only way to get a mortgage as a day-rate contractor to be honest. My situation was even more complicated in that I was buying a second home before selling the first one. Most lenders definitely prefer a 2 year track record. Be aware that gaps with no contract will be an issue for some. I was turned down by one lender for a 6-week gap, even though that's pretty normal.

I have used CMME twice now, and would thoroughly recommend them. When I remortgaged towards the end of last year, I was a very vanilla case once again, but nevertheless CMME had access to a product that wasn't available to the general public and I was better off with that, even though I didn't need a broker any longer.

superblade

I'm a contractor via my own ltd company on a day rate contract so if the same applies to you then great!

I went through trussle (fee free) and got an offer via accord for 1.89% at 85% LTV 

Accord took my day rate and multiplied that for calculating affordability (i've been contracting for 8 years back to back) All went very smoothly and i'd highly recommend them!

3 months bank statements for both personal and business and a copy of latest contract was all that was required!

Good luck!