Contractor Mortgages: FAQ
Contractor mortgages seem to have a lot of grey area when it comes to the requirements. Mortgage lenders are usually full of advice, but the clear cut rules seem to be different everywhere. While a bank has one set of regulations, other lenders, like CIS Mortgages have a completely different set of rules. It can make things a bit confusing for potential applicants, but these questions should help clear up grey areas. These are some of our most frequently asked questions from individuals that are interested in applying for a contractor mortgage.
Am I a contractor or freelancer? These two terms seem be interchangeable to most, but, in the mortgage world, they are two different things. Before looking into a contractor mortgage, it is vital to make sure that you are a contractor.
Contractors typically work on the basis of a contract. They generally work for one company, and work on the conditions agreed upon. Freelancers may work for several companies at once, and are more likely to work from home. Freelancers do not have their clients take money out of their earnings for taxes, whereas most contractors do.
If individuals are still unsure as to which category they fall into, they are encouraged to contact CIS Mortgage Advice for a consultation.
What is a high risk category? Many banks place contractors into what is called a high risk category. This means that they feel that contractors are less likely to pay back a mortgage than permanently employed staff. At CIS, every individual has the same chance when they apply for a mortgage instead of contractors being placed in a separate category.
Will I have to pay a higher deposit? Many banks charge contractors a higher deposit. Some clients report being required to pay deposits as high as 45%. This has created the myth that all contractors are required to pay a higher deposit than permanently employed individuals. At CIS, contractors receive the same rates that everyone else does.
Are interest rates higher? Interest rates for contractors may be higher when applying at a bank, but when individuals apply at a company that specialises in contractor mortgages, such as CIS mortgage Advice, they receive the same low interest rate mortgages that other individuals do.
Am I required to have at least three years of accounts? In short, no. CIS Mortgage Advice specialises in contractor mortgages, and works directly with the lender to guarantee that contractors will still be able to receive a mortgage without providing three years of accounts. Banks and other companies may follow this rule, but CIS Mortgage Advice is not a bank.
What if I just started contracting? Individuals that have just started contracting are still able to get a mortgage, even if they just began contracting. Some lenders may request the past two years of employment if an individual is just starting out as a contractor. Others typically require proof of future contracts to guarantee that contractors are able to pay their mortgage payments, minimising the risk to lenders.
Contractor mortgages offer contractors the same wonderful opportunity that permanently employed individuals have. Banks are known for turning down contractors, charging higher rates and charging higher deposits. This is what drove us to create CIS Mortgage Advice, and we continue to specialise in contract mortgages to help everyone own a home, just like they deserve to.