Contractor mortgage with mixed LTD company / IR35 history

SprostonGreenHead

I am looking for some general advice on which brokers and lenders are most suited to my situation and/or thoughts on my best plan of action for buying our first home.

My partner and I are looking to buy our first home (relocating from London to my original home in the North) and I am getting some pushback from traditional brokers with regard to high street and main market lender criteria as to the specifics of my working/financial situation, and I am looking for some general advice on which brokers and lenders are most suited to my situation and/or thoughts on my best plan of action for buying our first home.

Let me provide some facts (and apologies for the wall of text, but should reduce back-and-forth simple questions).

• We are an unmarried cohabiting couple aged 35-40
• First Time Buyers
• Looking to buy a freehold property in range 375-550k (ideally <450k due to Lifetime ISA bonus rules)
• We have approx 150k total capital for deposit/tax/costs/charges (7k less if property >450k)
• Deposit held in combo of current accounts, S&S ISA, Cash ISA and Lifetime ISAs
• Source of deposit is saved employment income, LTD company (contractor) profits and inheritance
• 80/20 % split between the two parties’ contributions to capital (not sure if relevant)
• Pitching ourselves at 75% LTV
• Expecting twins in May this year

My partner…

• Fully employed PAYE long term with same employer - 31.2k pa
• Will be taking maternity leave from March
• Moving away from work and cannot WFH
• Not returning to full time employment after Maternity leave
• Perfect credit history
• No outstanding debt

Myself…

Early 2017 - Oct 2020…

• LTD Company / PSC IT contractor / (sole) director 
• Continuous (single) contracts as LTD company except a 4 wk break between renewals.
• 2 clients over the whole period
• Day rate 575-550
• Annual self-assessment tax
• Approx 45-50k Gross / 42-48k Net Income per annum
• Income made up of Salary:Dividends ratio of 1:5

Nov 2020 - Dec 2020

• Out of Contract
• LTD company still active
• Still paid as above ^

Dec 2020 - Feb 2021

• Out of Contract
• LTD Company still active
• Still paid as above ^
• Claimed 3 months Furlough

Mar 2020 - Apr 2020

• Out of Contract
• No Furlough
• LTD company still active
• Still paid as above ^

May 2021 - Present….

• Inside IR35 PAYE Short term (IT) contractor operating under umbrella company
• LTD Company still officially “trading” but effectively not used
• LTD Company retained profits of ~ 30k
• Inside IR35 Day rate 650
• Approx 150k Gross / 88k Net per annum
• Still making tax payments on account and completing self-assessment tax returns
• Continuous service with one client. Renewal every 3 months
• Current contract expires March 2022
• Verbal commitment to be extended beyond, cannot obtain written
• Current client only ever renews contract in 3 month blocks
• (Probably) an offer of permanent employment on table (albeit it with less income - 80k Gross + benefits ish)
• Will continue working throughout the birth if no mortgage yet secured (not relaying this to lenders/brokers)
• If mortgage & property secured then looking to take 4 weeks off between contracts/renewal or during an active contract for birth (not relaying this to lenders/brokers).
• Perfect credit history and a very high “Score”
• No outstanding debt (1 Credit Card paid in full monthly)

Most brokers we have spoken to seem to centre around Halifax’s rules as a guide (although my reading is that for some lenders, 1 year of continuous service might be enough rather than 2). See under “Contractors” at halifax intermediaries criteria page (I cannot post the link because my account is not old enough).

I will quote the (most) relevant part…

Employed
Treat as Employed if:

• Tax is paid by the company they work for (or they are employed via an umbrella company who deduct tax) OR

• Contractors who earn more than £500 per day or £75k per annum, OR are an IT contractor on any income, can be treated as employed irrespective if the customer pays their own tax, or classes themselves as self-employed. (The only exception to this is where a customer has more than one contract or they have set up a limited company and employs other contractors, in which case they should be treated as self-employed).

Additionally to be treated as employed the customer must have either:

• 12 months or more continuous employment, with 6 months of the contract remaining, or

• 2 years continuous service (for the last 2 years as at the date of application) in the same type of employment

The brokers we spoke to additionally told us that the top 10 (“cheapest”) and most high street lenders wouldn’t touch me without meeting this general criteria. They appear to interpret “can be treated as employed” as “should/must be treated as employed” and that I therefore neither qualify as employed or self-employed. If we wait until May (not ideal) I would have 12 months consecutive service with one client, but they will never have me in a position of 6 months of contract remaining. If I switch clients to one that does offer 6 months, I will not have the continuous employment. In my industry, a 6 month block would be the absolute max, and you’d only ever have that to run in the few weeks before when the renewal / new contract is agreed (therefore needing to apply for the mortgage within that few weeks, having a property to buy etc).

I’m struggling to understand what current options we have and/or what our best plan is. If the worst comes to the worst, we will rent (again), but even having a full year in my current contract (in May) with current terms (3 months renewal) doesn’t seem to fix a lot of lending criteria.

Are there any users with suggestions (brokers and lenders), or thoughts on what our best play from here is? Thank you to anyone who took the time to read through this and any responses in advance. We are capital and income “rich” (at least in comparison to historically!), debt free, with a decent deposit and with a history of sufficient earnings (albeit in my case under 2 “regimes”). I really did not expect it to be this hard

isplumm

have you checked this out - https://forums.contractoruk.com/ they have forums aimed at people in your situation or https://www.contractoruk.com/money/contractor-mortgages.html
Mark