4 Steps Contractors Can take to Secure Home Loans

Posted on in Umbrella Company.

Umbrella companies have found that contractors often encounter more difficulty than employees when it comes to securing the funds necessary for home loans. 

“The number of self-employed peopled has increased by 10% since the start of the financial crisis…[but] contractors don’t fit in easily with the forms and processes they (lenders) use to make a mortgage approval decision,” said Graham Jenner, director of Nopalaver, a group of umbrella companies

Because it is more difficult for contractors to secure these funds, even though they take home more of their pay on average than employees, they are recommended to take the following steps to increase their chances of being approved for a mortgage:

  1. Offer a big deposit or use existing equity - Contractors who can muster up the largest deposit or use significant existing equity have the most choice when it comes to purchasing a home.  Unfortunately, lenders are often looking for 20-40%.  For some contractors, this provides a viable solution, but for many it does not.
  2. Use a “self cert” mortgage – This type of mortgage aims directly at freelancers and contractors.  They have been available for nearly 10 years, and contractors can get approval within hours in some cases.
  3. Use a specialist “contractor broker” – Contractors who have a good credit history and reasonable mortgage request will have no problems working with a contractor broker.
  4. Contractors with significant experience get a letter from the accountant or umbrella company – Lenders feel more secure working with contractors who have 3 years of experience or more working with in their current profession.  If they can offer audited financial statements for the time they work as a contractor, lenders will have much less hesitation providing them with a mortgage.

Above All, Search the Market Patiently

Lenders vary in the amount of risk they are willing to take on.  If contractors are relatively new in their profession, it may be more difficult, but not impossible, to find a lender willing to work with them.  What one lender says may not necessarily be true for all lenders.   

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