As a contractor, you may be aware that getting a mortgage can be challenging. Traditional lenders tend to favor permanent employees with a regular salary, leaving contractors with limited options. However, there is good news – contractor mortgages are specifically designed to meet the needs of self-employed workers like you.
In this article, we’ll explore what contractor mortgages are, how they work, and what you need to know before applying for one.
What are Contractor Mortgages?
Contractor mortgages are home loans designed for individuals who work on a contract basis rather than as permanent employees. These mortgages are designed to take into account the unique financial circumstances of contractors, including fluctuating income, irregular work patterns, and the need to manage multiple clients simultaneously.
How do Contractor Mortgages Work?
Contractor mortgages work in much the same way as traditional mortgages. You borrow a sum of money to buy a property and pay it back over a fixed period, usually 25-30 years. The main difference is that contractor mortgages take into account your earnings as a contractor, rather than a regular salary.
To qualify for a contractor mortgage, you’ll typically need to provide evidence of your income over the past two to three years. This can include invoices, contracts, and bank statements. Lenders will typically use an average of your income over this period to determine how much you can borrow.
What are the Benefits of Contractor Mortgages?
The main benefit of contractor mortgages is that they are tailored to the needs of self-employed workers. This means that they are often more flexible than traditional mortgages and may offer more favorable terms, such as lower interest rates.
In addition, contractor mortgages may also allow you to borrow a higher amount than you would be able to with a traditional mortgage, as lenders take into account your potential future earnings rather than just your current income.
What are the Risks of Contractor Mortgages?
As with any financial product, there are risks associated with contractor mortgages. One of the main risks is that your income as a contractor can be unpredictable, which can make it difficult to keep up with mortgage payments if your earnings suddenly drop.
In addition, contractor mortgages may come with higher fees and interest rates than traditional mortgages, as lenders view self-employed workers as a higher risk.
How to Apply for a Contractor Mortgage
If you’re interested in applying for a contractor mortgage, it’s important to do your research and find a lender who specializes in this type of mortgage. You may also want to speak to a financial advisor who can help you navigate the application process and find the best deal for your circumstances.
When applying for a contractor mortgage, you’ll typically need to provide evidence of your income, as well as details of your employment history and any outstanding debts or financial commitments.
Find out more info on https://www.needingadvice.co.uk/category/mortgages/knowledge-mortgages/mortgages-for-different-occupations-income-types/
Conclusion
Contractor mortgages can be a valuable tool for self-employed workers who want to get on the property ladder. However, it’s important to understand the risks and benefits of this type of mortgage before applying. By doing your research and seeking professional advice, you can find the right contractor mortgage for your needs and secure your dream home.