5% Contractor Mortgages Deposits
5% Contractor Mortgages Deposits are now available to contractors using the Government’s Help to Buy mortgage scheme.
Previously, first time buyers, including first time contractors, were priced out of the market as lenders wanted 25% deposits.
They were spooked by the great banking crisis of 2007/8 and were unwilling to lend except to just the very safest borrowers.
As first time buyers are the ones who keep the cogs of the housing market wheels running, it meant that house prices were stagnating.
Help to Buy Mortgages for Contractors
The Government’s Help to Buy scheme kick-started the property market.
They guaranteed 20% of the loan when someone wanted to buy a house. That meant that the buyers, including contractors, only had to come up with 5% of the money.
Therefore, that meant that a house had to fall by 25% in value before the high street bank or building society took a hit.
It wasn’t the Government who loaned the money to the borrower. It was the lender that did that.
All the Government did was to guarantee 20% of the loan.
First Time Buyers / First Time Contractors Took Advantage
Of course, the Government knew that if first time buyers, like first time contractors, came onto the market again it would send house prices higher . So it would never cost them a penny.
This was indeed what happened.
Therefore, borrowers were happy as it meant that, as they just had to stump up the 5% contractor mortgages deposit. They could afford this.
Lenders were happy also. A house would have to fall in value by more than 25% before they took a hit.
The Government were happy as there was now a feelgood factor in a rising housing market. This helped get them re-elected in 2015.
Rising Housing Market for Contractor Mortgages
The great thing about it for them was that it didn’t cost them anything. It was a very clever scheme.
The rising housing market took the risk of losses away from them. It meant that those houses and flats, where they guaranteed the 20%, rose in value well away from the threshold where they would lose out if someone defaulted on their mortgage.
That’s the beauty of the Help to Buy scheme. No one loses.
Specialist Contractor Mortgage Brokers
Contractors who want to take advantage of the Government’s Help to Buy scheme and the 5% contractor mortgages deposit should use a specialist contractor mortgages broker.
If they don’t, they risk being asked to provide three years worth of accounts. They would, also, get their offers based on their Director’s salary if they are a personal service company contractors.
By using a specialist contractor mortgages broker, all you have to provide is a copy of your contract as proof as earnings.
You will also get a contractor mortgage offer based on your daily rate annualised. They assume you work 48 weeks of the year and the mortgage lender will loan you 4 times your annual salary. They might even give you 5 times it.
Contractor Mortgage Deposits
Obviously, the more deposit that you can put up the better the interest rates you can get.
However, those specialist contractor mortgage brokers can often get contractors mortgage interest rates at less than the market rate.
To find out more about 5% contractor mortgages deposits using Help to Buy, or to apply, please click on Contractor Mortgage Application and fill in the form there.