Securing a mortgage is a significant milestone on the path to homeownership, yet this journey can be fraught with obstacles for contractors in the UK. While enjoying the independence and flexibility of contract work, contractors encounter unique challenges when attempting to convince lenders of their financial stability.
Contractors Have to Jump Through Mortgage Hoops
When lenders learn of a contractor's status, they invariably request that the contractor jump through hoops to meet the lender's requirements. Some of the common requirements include:
Proof of Income
A primary hurdle for contractors lies in proving their income. Unlike salaried employees with regular pay slips, contractors' earnings fluctuate, making it challenging for lenders to gauge their financial reliability.
Moreover, income verification can be further complicated if contractors utilise deductions to lower taxable income.
Advice and guidance from specialist mortgage advisors such as Cleerly, Champion Contractors' dedicated mortgage advisory partner, can be vital in helping contractors secure mortgage finance.
Continuous Employment
The absence of a conventional employment history poses another significant challenge for contractors. Traditional employees demonstrate stability through long-term employment, whereas contractors tend to have diverse clients or projects, leading lenders to perceive their income as less predictable and secure.
Retaining Champion as an employer significantly helps contractors overcome this particular issue. Agencies that encourage or force contractors to change umbrella companies when beginning a new assignment overlook how issues such as continuous employment can be detrimental to contractors.
Accurate Financial Records
Documentation requirements often exacerbate the mortgage application process. Contractors are regularly asked to compile extensive paperwork, including tax returns, to support their application processes. Without meticulous record-keeping, they risk being deemed ineligible for a mortgage.
At Champion, we are well-versed in supporting our contractors in providing the documentation needed to support mortgage applications. We also know from experience that contractors who have used multiple umbrella companies across their contracting careers struggle to consolidate the documentation required by lenders, making the application process extremely stressful.
Simplifying the Contractor Mortgage Process
In conclusion, contracting offers flexibility and variety but poses challenges for contractors seeking a mortgage in the UK.
Overcoming these obstacles demands meticulous financial planning, record-keeping, and, often, the expertise of mortgage professionals well-versed in the nuances of self-employment in the UK's lending landscape.
At Champion Contractors, our partner, Cleerly Limited, is a specialist independent and regulated mortgage advisor with expertise in supporting contractors, freelancers, and self-employed professionals throughout their mortgage journey.
For further assistance and advice on securing the best mortgage deals available to contractors, visit our website at https://www.champion-contractors.co.uk/ or follow us on LinkedIn.
Alternatively, contact the Champion Contractors team on 0161 703 2549 or email info@championcontractors.co.uk.