Which Contractor Mortgage?
People often ask us which contractor mortgage should a contractor choose?
What most contractors do is to walk into a high street bank or building society and ask for a mortgage. This is a huge mistake. They will tell you two things:-
1. You need to produce three years worth of accounts
2. The contractor mortgage offer will be based on a multiple of your Directory’s salary.
No matter which contractor mortgage you get it would be worse than if you would have got as a permanent employee.
Shock to Contractors
This will come as a shock to contractors – especially those that have been contracting for less than 3 years. Indeed, when I was told the above, a good few years ago, I just gave up for many years looking to own my own house.
I would have been better staying as a permie as I would have got a better mortgage offer. I wished that I had bought a house or flat PRIOR to becoming an IT contractor.
Of course, this was before the days of specialist contractor mortgages. Tony Harris started that market just over ten years ago.
He went to lenders and asked them to fund specialist mortgages for IT Contractors. This took lenders aback and shocked at his temerity in asking for long-term mortgages for people, i.e. IT Contractors, who had insecure jobs. This could be a disaster for them, they thought.
Which Contractor Mortgage for Tony
However, this could potentially be a very lucrative market for them as there were a growing number, now measured in the hundreds of thousands, of IT Contractors in the UK.
So, Tony managed to get one lender to dip their toe (the very edge of their big toe) in the water to test specialist contractor mortgages to see if it would work.
And work it did!
They found that IT contractors paid their monthly mortgage instalments at least as well as anyone else and didn’t default on their mortgages during hard times.
So, they started lending more IT Contractors money for specialist contractor mortgages. Then Tony started to get other lenders to loan money to IT Contractors after this initial success.
It meant that he was able to get better and better rates for IT contractors as the lenders fought each other to get into this new lucrative market. Remember this when you are considering which contractor mortgage you should get.
Mortgages for All Contractor Now
Within the last couple of years Tony was able to get these lenders to extend loans to all contractors and not just IT Contractors.
The deal he has got with them is much better than the deal that contractors would get if they walked into a high street bank or building society.
The main points of the deal are:-
1. Contractors would not need three years worth of accounts. All the proof they would need to offer contractors a mortgage would be the contractor’s contract.
2. The offer would be based on the contractor’s daily rate annualised. That is Daily Rate x 5 x 48 x 4.
Contractor Mortgage Offers
They can now get contractors mortgage offers on the same day that the contractor contacts them.
Indeed they can get first time contractors a mortgage offer on the very first day of their very first contract. It means that they can get the keys to their dream house approximately four weeks after their first day on a contract.
Indeed, in one case they got one first time contractor into his dream house just two weeks after starting his first ever contract.
Tony has so much credibility with lenders now that he can often get contractors mortgages at better than market rates.
Help to Buy Mortgages
With the advent of Help to Buy mortgages, he can get contractors 95% mortgages.
So, which contractor mortgage should you look for – one from a high street bank or building society – or one from a specialist contractor mortgage broker like Tony?
I think that one’s a no brainer!
To find our more about these specialist contractor mortgages click on Contractor Mortgage Application and fill in the form there.