HOURLY RATE CONTRACTOR MORTGAGES
How much could you borrow?
Our Advisors understand exactly which lenders to approach and how to best position your circumstances to them in order to help you apply for a mortgage based on a contractor receiving an hourly rate.
Whether you are PAYE through an Umbrella Company or contracting through your own Limited Company, a specialist Mortgage Advisor with the right knowledge and contacts can not only make the difference between you getting a mortgage or not, but they also ensure you will obtain the best interest rate available to you.
Forget the need for Limited Company accounts, tax returns, SA302s, Tax Calculations and Overviews or payslips, a Contractor Mortgage is usually obtained by using your contract as evidence of your income and your hourly, daily or weekly rate is annualised over a set number of weeks per year to become your income for mortgage purposes. It is a vastly simplified way of evidencing your contractor income to secure the mortgage you need, be it a remortgage or a property purchase.
CASE STUDY
Around a year ago, Miss Reyes switched from permanent employment to contracting via her own Limited Company, outside of IR35. She is paid a day rate of £400 and her contract was initially for a period of 3 months and has rolled on a further 3 months each time the renewal date was near. She currently has around 2 months remaining on the contract when she believes it will be further extended but at present, she doesn’t have any concrete documentations to support this.
She is looking to purchase her first property and after speaking to her Accountant to provide him with the information he requested to sort her first annual company tax return, she was put in touch with a Mortgage Advisor her Accountant knew.
The Mortgage Advisor explained to Miss Reyes that the majority of lenders typically require 2, if not 3 years of finalised Limited Company accounts from a Limited Company Director and without these, she wouldn’t be able to get a mortgage. The Advisor told her that there may be one or two lenders only who would be able to assist once she has her first set of finalised Limited Company accounts completed but they would only define her income as the total of the salary and dividends she has drawn from the Limited Company. Based upon previous conversations Miss Reyes had with her Accountant she knew that her salary and dividends would total circa £50,000 as her Accountant explained drawing over this amount would then mean that she would be taxed at 40% on any further income she draws. The advisor mentioned that the very maximum she would be able to borrow on a new mortgage would therefore likely be £250,000 which is 5 times the sum total of her £50,000 salary and dividends.
Miss Reyes was hoping to borrow a little more than this as she had set her sights on a property at £400,000 and was hoping to put down a £100,000 deposit borrowing the remaining 75% (£300,000). She was passed Contractor Mortgage Finders’ details from a work colleague who had previously used them. She was put in touch with a specialist contractor mortgage broker who straight away advised her that they deal with this type of situation on a regular basis. They explained the fact she didn’t currently have any finalised Limited Company accounts was not an issue as they were able to source a mortgage with a contractor friendly lender who would simply use her day rate contract as evidence of her income and further more, on a day rate of £400, she was actually able to borrow up to £460,000 more than sufficiently covering what she was looking to borrow. The rate she was offered was very competitive too and it was from a High Street lender she was aware of.