If you are a contractor on a daily rate there are many mortgage options to consider. Our guide will help you with the options available
As specialist mortgage brokers for contractors, our dedicated team is dealing with the best mortgage lenders for contractors on a daily basis. We understand the issues, questions, and criteria lenders rely on to approve a contractor mortgage application. This guide will hopefully go some way in clarifying the details you need to understand to ensure a successful application.
Contracting work is common in several industries. An independent contractor works for companies or businesses as needed, under the terms of an agreed contract.
Mortgage lenders generally classify Contractors under one of the following descriptions and treat them differently in regard to how they view their income and what proof of income they will accept in their mortgage underwriting process:
Once a contract is nearing its end date it one tends to start discussing new contract terms with the existing company, or a new one, to ensure there is little or no break between income sources.
For mortgage purposes, there needs to be no more than a week gap between a contract, and no more than 8 weeks total in a year otherwise this makes obtaining a mortgage that much more difficult. Your income must be in sterling, subject to Canadian tax and your experience in the industry needs to be in Canada.
Contracting work can make applying for a home loan quite challenging. This article tells you everything you need to know on this topic.
IT CONTRACTOR MORTGAGES
IT Contractor Mortgages – What you need to know If you’re an IT contractor looking to purchase a property, you will most likely have to take out a mortgage. Historically, people in more unpredictable employment circumstances (including contractors, freelancers, and the self-employed) may have a harder time getting a mortgage than those on a more regular income.
The eligibility criteria for a mortgage usually focus on financial circumstances and without a consistent income from an employer, you may not fit the bill for some lenders. Even if you consistently earn well above the average salary, working as a contractor, your circumstances can still cause lenders to look at your application differently.
Is it easier now for IT contractors to get a mortgage?
It is currently easier to get a mortgage as a self-employed IT contractor than it once was, as more and more people are choosing to enter non-standard forms of employment. Several mortgage lenders offer specific mortgages and repayment plans for contractors or those who are self-employed.
At the suncapitalists. com-Mortgage Broker, we work with lenders who specialize in providing mortgages for contractors. We’ll help you put your application together so it has the best chance of success with the lenders we have relationships with.
What is an IT contractor mortgage, and how does it work?
An IT contractor mortgage is, in simple terms, a mortgage specifically designed for self-employed workers in the IT industry. The loan you take out is secured against the value of your new property until you pay it off over several years.
When you apply for a mortgage, the lender assesses your application based on how likely you are to keep up with mortgage repayments. They will take into account your credit history and your current financial circumstances. An applicant with outstanding credit, a stable income, and enough money to put down a large deposit should have little problem taking out a mortgage.
However, as a contractor, you don’t have the benefits of a stable income, no matter how much you earn from each of your various clients. The very nature of your work means that while you may earn a considerable amount one year, you are not guaranteed the same income in the following year. For this reason, IT contractors are seen as a higher risk to some lenders, and it can be more difficult for them to meet the eligibility criteria.
There are more than 1million self-employed workers in CANADA and we recognize these people need houses too. Many mortgage lenders are meeting the increasing supply of self-employed workers by offering mortgages specifically designed for contractors. As a specialist mortgage broker, we understand the more irregular nature of contract work. By consulting with us, you may significantly increase your chances of being able to take out a mortgage.
How is an IT Contractor mortgage assessed?
An IT contractor mortgage is different from a standard mortgage in the way it is assessed. A conventional mortgage might take a more general look at how much an applicant earns each year balanced against how much they spend. A contractor mortgage, on the other hand, will drill more deeply into the applicant’s work situation.
The eligibility criteria will take into account factors such as the length of your current contract, your day rate, and the hours you have historically worked. A mortgage assessed this way might work more in your favor than a standard one.
How do you arrange an IT contractor mortgage?
Taking out a mortgage as an IT contractor can be slightly trickier than if you are in permanent employment. But as long as you can provide enough evidence in your favor, you should have fewer challenges. Here are some tips to improve your suitability:
Provide as much evidence as you possibly can in favor of your financial stability. This includes current and past contracts, bank statements, tax returns, and invoices. With our experience in contractor mortgages, we will then be able to determine your affordability based on these documents. Evidence of previous experience and relevant industry qualifications will also help your case.
Strengthen your credit report before you take out a loan. The better your score, the more chance you have of a lender accepting you. Pay off any outstanding debts, keep up with your regular payments and limit your spending in the months leading up to your consultation.
Save for a higher deposit. The more money you can put down in an initial payment, the better interest rates you will likely be offered on your repayment plan, meaning you will probably save money in the long run. Try securing the highest deposit you can before taking out a mortgage.
If you are buying a property with a partner, you may wish to consider taking out a joint mortgage. This is particularly useful if your partner is in permanent employment, as you will appear more reliable and stable as a couple. You could also choose to apply with a guarantor to offset the risk to the lender.
Find a broker who specializes in providing access to mortgages for contractors. We know and understand all the technicalities of contract work and may be able to help you find the right rates, saving you time and money over the course of your mortgage.
What if you have a limited company?
If you have a limited company, the application process may be a little different. When assessing a company for mortgage lending, the lender may only take your personal earnings into account rather than the profitability of the company.
You may have a hugely profitable business while taking a low salary. In this case, we will need to look for a specialist lender who will look at all of your accounts. You will need to be able to distinguish between the money you hold and the money held by your company when making your case.
Speak to a mortgage broker
If you are an IT contractor looking to buy a property, it is best to talk to a specialist about your options.
Why Use suncapitalists.com -Mortgage Broker?
At the suncapitalists.com -Mortgage Broker, it’s our vision to become Canada’s most trusted and respected mortgage broker. The only way for us to achieve this is by providing straightforward and transparent advice to each and every one of our clients.
From your first call to your last, we put customer service first before all else so you can be confident in getting expert mortgage advice.