Applying for new mortgage whilst being paid as contractor via an Umbrella company

Daisy_84

I work as a contractor and am paid via an umbrella company. I am due to apply for a new mortgage in 2023 when my current fixed mortgage deal ends. 

I was wondering if anyone has done this before? Is it a complicated process? 

london21

It should not be complicated. A broker should be able to assist you. 

K_S

Daisy_84 said:

I work as a contractor and am paid via an umbrella company. I am due to apply for a new mortgage in 2023 when my current fixed mortgage deal ends. 

I was wondering if anyone has done this before? Is it a complicated process? 

@daisy_84 Not overly complicated but there are a lot of different ways that lenders approach contractors paid through an umbrella company - as PAYE employees, based on your day-rate, etc.

Your pool of lenders will depend on the day-rate, work schedule, contracting track record, time left on current contract, etc. 

I would definitely recommend considering the use of a broker when the time comes. The MSE guide here will help on how to find one 
https://www.moneysavingexpert.com/mortgages/best-mortgages-cashback/#step3

MWT

Daisy_84 said:

I work as a contractor and am paid via an umbrella company. I am due to apply for a new mortgage in 2023 when my current fixed mortgage deal ends.

Not considering a new product from your current lender?

Generally that wouldn't need a new application, just a few clicks on the website, but there can be reasons why you want to remortgage elsewhere...

Daisy_84

MWT said:

Daisy_84 said:

I work as a contractor and am paid via an umbrella company. I am due to apply for a new mortgage in 2023 when my current fixed mortgage deal ends.

Not considering a new product from your current lender?

Generally that wouldn't need a new application, just a few clicks on the website, but there can be reasons why you want to remortgage elsewhere...

I hadn't thought of that. I just thought maybe my current lender might give me a variable rate without choice. 

If I can stick with them on a good deal then that would be great. 

K_S

@daisy_84 From your other thread, I assumed you needed to raise capital to pay off the H2B equity loan. 

If that's not the case and all you need is a change in product (new fixed term) with no additional borrowing or change in term, then you should have product-switch/product-transfer/rate-switch options with your current lender that involve no underwriting, no income checks, etc.

Daisy_84

K_S said:

@daisy_84 From your other thread, I assumed you needed to raise capital to pay off the H2B equity loan. 

If that's not the case and all you need is a change in product (new fixed term) with no additional borrowing or change in term, then you should have product-switch/product-transfer/rate-switch options with your current lender that involve no underwriting, no income checks, etc.

Thank you very much for your response. Yes I do need to raise capital to pay off the H2B equity loan indeed. How best do you recommend I approach that, bearing in mind I also have to get a new mortgage deal as the variable rate with my mortgage provider might not be favourable. It's a year early, but I am trying to make sure I understand the process early enough and so that I can cross the Ts and dot the Is appropriately. 

I was wondering what counts as equity? I am nervous about whether or not my house will have accrued enough to cover the help to buy loan. I bought the house for £205,000, as a terraced. I put down £10,000 as a deposit. My Mortgage deal was £154,700. Help to buy loan was 40,300. The average house price in the area is currently £235,000. The average estimate takes into account the semi's and detached houses in the estate. I wonder what your thoughts are on the vignette?

MWT

Daisy_84 said:

The average house price in the area is currently £235,000. The average estimate takes into account the semi's and detached houses in the estate. I wonder what your thoughts are on the vignette?

Have any other terraces similar to yours sold recently?

Just based on that average price it doesn't look likely that your value has increased a lot...

From one of your other posts you mention that your have not been overpaying the mortgage so that will not have gone down much either.

That just leaves your income and the affordability of a higher mortgage based on it, are you now earning more than you were when you got the original mortgage, and is that enough to let you increase the mortgage sufficiently even if you can't reduce the LTV at the same time?

MWT

Just to keep all the information in one place...

Daisy_84 said:

I bought for 205,000 and terraced houses like mine have sold for 210,000 in the last two years. 
 

Daisy_84 said:

It's £142,000. The Loan amount was £154,000. My fixed term ends in 2023. 

So you have more time the reduce the current mortgage before the fix ending next year, but right now you have roughly, £210,000-£41,283-£142,000=£26,717 equity in the house.

Net result is you would need a new mortgage of around £142,000+£41,283 = £183,283 and that puts you in the 90% LTV bracket.

Doing it right now you'd need to figure out if your income will support that level of mortgage and if you can get a 90% LTV mortgage?

... by next year though that could be down to an 85% LTV with more paid off of your existing mortgage, but depending on how the valuation moves...

Just in terms of your thinking, the level of equity helps you reduce the LTV, but your income still needs to support the borrowing you'd need to get rid of the equity loan, so that brings you back to how much you can borrow give your income and that leaves you with the great advice from K_S above to talk to a broker about what you can reasonably expect to borrow...

I'd suggest having that conversation early so you can consider making over payments if allowed under your current fix, or just saving hard to increase your cash reserves so you can reduce the amount you will need to increase your borrowing...

Daisy_84

MWT said:

Just to keep all the information in one place...

Daisy_84 said:

I bought for 205,000 and terraced houses like mine have sold for 210,000 in the last two years. 
 

Daisy_84 said:

It's £142,000. The Loan amount was £154,000. My fixed term ends in 2023. 

So you have more time the reduce the current mortgage before the fix ending next year, but right now you have roughly, £210,000-£41,283-£142,000=£26,717 equity in the house.

Net result is you would need a new mortgage of around £142,000+£41,283 = £183,283 and that puts you in the 90% LTV bracket.

Doing it right now you'd need to figure out if your income will support that level of mortgage and if you can get a 90% LTV mortgage?

... by next year though that could be down to an 85% LTV with more paid off of your existing mortgage, but depending on how the valuation moves...

Just in terms of your thinking, the level of equity helps you reduce the LTV, but your income still needs to support the borrowing you'd need to get rid of the equity loan, so that brings you back to how much you can borrow give your income and that leaves you with the great advice from K_S above to talk to a broker about what you can reasonably expect to borrow...

I'd suggest having that conversation early so you can consider making over payments if allowed under your current fix, or just saving hard to increase your cash reserves so you can reduce the amount you will need to increase your borrowing...

Thank you so much. That's really helpful. 

Daisy_84

MWT said:

Just to keep all the information in one place...

Daisy_84 said:

I bought for 205,000 and terraced houses like mine have sold for 210,000 in the last two years. 
 

Daisy_84 said:

It's £142,000. The Loan amount was £154,000. My fixed term ends in 2023. 

So you have more time the reduce the current mortgage before the fix ending next year, but right now you have roughly, £210,000-£41,283-£142,000=£26,717 equity in the house.

Net result is you would need a new mortgage of around £142,000+£41,283 = £183,283 and that puts you in the 90% LTV bracket.

Doing it right now you'd need to figure out if your income will support that level of mortgage and if you can get a 90% LTV mortgage?

... by next year though that could be down to an 85% LTV with more paid off of your existing mortgage, but depending on how the valuation moves...

Just in terms of your thinking, the level of equity helps you reduce the LTV, but your income still needs to support the borrowing you'd need to get rid of the equity loan, so that brings you back to how much you can borrow give your income and that leaves you with the great advice from K_S above to talk to a broker about what you can reasonably expect to borrow...

I'd suggest having that conversation early so you can consider making over payments if allowed under your current fix, or just saving hard to increase your cash reserves so you can reduce the amount you will need to increase your borrowing...

Hi, I was wondering if you can help me make sense of this again. 

Two neighbours three doors away have just sold their terraced houses for £240.000 each. Mine might actually be more as it is end of terrace and has a larger garden. 

I've put together new workings in excel and have attached a screenshot. I was wondering if this workings make any sense?

I will be getting a mortgage broker at the end of the year, but I just want to try to make sense of it myself first.