Contractor Mortgages
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New Build Mortgages for Contractors

New Build Mortgages for Contractors | Contractor Mortgages | Scoop.it
Contradicting views on new build mortgages coupled with dodgy mortgage advice for contractors can get messy. Quickly. Let's clean it up for you:
John Yerou's insight:
Here's the thing about lenders and developers selling new build properties.

They assume anyone willing to get in first is also willing to stump up a huge deposit.

This assumption - via some clever market analysis, it has to be said - has seen deposits for new builds continually creep up.

In a strange turn of events, new build flats command a higher deposit than new build homes.

For a flat or apartment, expect to have to put down around 25% deposit; for a home, lenders are asking for at least 20% up front. 

That is, until now!

We're decimating the deposits contractors need to find to buy a new-build property.

We fully understand the hoops contractors have to jump through to get any sort of mortgage.

We've spent years lowering that particular barrier to entry.

Now, we're taking that philosophy to the new build developers through one of the most established contractor mortgage lenders out there.

We're not sacrificing anything by way of evidencing income. Your gross contract income - your annualised day rate - is still what we use to work out how much you can afford.

None of that accounts or payslips malarkey High Street lenders ask for. And given that powerful top-line income, we can access mortgages for new build properties for contractors with just 10% deposit.

The government kick-started the UK's floundering construction with their mortgage schemes.

We're giving it a post-Brexit boost to help maintain that impetus. 

You deserve to be a part of that movement without having to pay through the nose to sign up. And now, you can. Enjoy:
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Saffron BS Contractor Mortgage Lending Criteria

Saffron BS Contractor Mortgage Lending Criteria | Contractor Mortgages | Scoop.it
Saffron BS is a truly Ab Fab mortgage lender for contractors. Here's the criteria for their extensive range of self-employed niche mortgages:
John Yerou's insight:
Saffron Building Society was one of the first lenders to open its doors to the contracting community. Certainly one of the first to look beyond the IT sector and minimum earnings, at any rate.

Despite this, certain other stipulations prevented those newer to contracting accessing their mortgages:
• time served as a contractor;
• duration of contract remaining;
• and minimum age.

Don't get the wrong idea. We know why the building society put those criteria in place. 

ALL lenders had to interpret the FCA's responsible lending guidelines that followed the credit crunch in a way that matched their ethos. Some lenders followed those guidelines to the letter, while others adopted a more cavalier approach.

But now, we're beginning to see recovery; even in a post-Brexit UK, signs are positive that we'll return to pre-2007 spending power and house prices will recover in tandem.

In alignment with these signs, Saffron has removed some of the barriers contractors faced accessing their mortgages before.

We've updated our guide page accordingly. If you're contracting in a sector that lenders don't class as mainstream or you don't make the £300+ per day that lenders like Halifax demand of contractors, Saffron may well be the contractor-friendly lender you've been looking for.

Check out their revamped lending criteria for yourself and see if your earnings and status qualify for a mortgage based on your contract rate rather than the payslips and accounts so often demanded on the High Street's:
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It's a prime time for contractors to remortgage off their SVR

It's a prime time for contractors to remortgage off their SVR | Contractor Mortgages | Scoop.it
Worried that your mortgage lender's variable rate's costing more than it should? Now's the time for contractors to remortgage to a better deal »
John Yerou's insight:
Here's the deal. The Bank of England's low lending rate to other institutions is going to stay at its historic low of 0.5% for some time yet. 

Why should this affect you as a contractor?

It means that mortgage lenders can continue to offer amazing fixed-rate deals at competitive rates.

If you're a contractor who's introductory rate is about to come to an end (or already has) and you don't fancy slipping onto your lender's variable rate you can do something about it. 

In our latest post, we consider the two major benefits of remortgaging for contractors:

► saving a bundle on your monthly repayments, especially if you've never secured a mortgage using your day rate before;

► cut down the term of your mortgage with the saving you can make today by switching to a new introductory rate. 

There was a time when homeowners had one or two mortgages over the course of their life. 

In a consumer-oriented world, that concept's been flipped on its head. 

For a few contractors, switching mortgages may not be the right thing to do. 

But for the vast majority?

There's a potential >£2,000 a year* saving sitting on a table with your name on it.

*based on Legal & General Mortgage Club data
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Brokers reveal how they resolved their toughest cases - Marketwatch - Mortgage Solutions

Brokers reveal how they resolved their toughest cases - Marketwatch - Mortgage Solutions | Contractor Mortgages | Scoop.it
When a case lands on your desk such as a borrower with multiple income streams, short employment history, or a client approaching retirement, the shoulders of even the hardiest broker are bound to sag a little at the thought of the battle which lies ahead.

When a case lands on your desk such as a borrower with multiple income streams, short employment history, or a client approaching retirement, the shoulders of even the hardiest broker are bound to sag a little at the thought of the battle which lies ahead.

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John Yerou's insight:
> "When [our client] came to us, we could see that he could afford the mortgage, but the challenge we faced was communicating that to high street lenders as we typically avoid the private banking route. We approached a number of banks but eventually placed him with Clydesdale who were able to see the wood through the trees " ~ John Yerou
=
What happens when a potential borrower can afford the mortgage for which he's applying, but the High Street lenders can't (or won't) see it?

It's a problem we face time and again. Limited company freelancers and contractors have a lot of their affordability 'tied up' in retained profits. 

A snapshot of their accounts shows little disposable income.

A snapshot of their accounts shows little disposable income. But the lens through which High Street banks and building socities view that affordability, their generic lending model, is skewed.

It doesn't capture the big picture.

It doesn't capture the big picture. The contractor's accountant has streamlined their income for tax planning. Acording to their accounts, most independent professionals have very little income at their disposal to put towards a mortgage.

At Freelancer Financials, we avoid that lending model like a scarecrow avoids Guy Fawkes night. Instead, we use a method called contract-based underwriting to work out a contractor's mortgage affordability.

The method doesn't rely on accounts; rather, it uses a contractor's annualised contract rate to work out how much they can afford.

But there are times when we face sorting out multiple income streams. 

When you add multiple earners into the mix, it gets even tougher.

When you add multiple earners into the mix, how do you possibly sort the wheat from the chaff? 

But there are times when we face sorting out multiple income streams. When you add multiple earners into the mix, how do you possibly sort the wheat from the chaff? How can a broker extract relevant earnings for borrowing purposes AND present them to a mortgage lender prepared to take a risk on that combined income?

In this industry wrap up of how brokers deal with such issues (and more) from Mortgage Solutions, myself, Simon Chalk from Age Partnership and Ross Murphy from Capricorn Financial Consultancy present our trickiest cases, and our solutions to them. Enjoy ►
> "When [our client] came to us, we could see that he could afford the mortgage, but the challenge we faced was communicating that to high street lenders as we typically avoid the private banking route. We approached a number of banks but eventually placed him with Clydesdale who were able to see the wood through the trees…" ~ John Yerou
===
What happens when a potential borrower can afford the mortgage for which he's applying, but the High Street lenders can't (or won't) see it?

It's a problem we face time and again. Limited company freelancers and contractors have much of their affordability 'tied up' in retained profits. 

A snapshot of their accounts shows little disposable income.

But here's thething. The lens through which High Street banks and building socities view that affordability, their generic lending model, is skewed.

It doesn't capture the big picture!

The contractor's accountant has streamlined their income for tax planning. Acording to their accounts, most independent professionals have very little income at their disposal to put towards a mortgage.

At Freelancer Financials, we avoid that lending model like a scarecrow avoids Guy Fawkes night. Instead, we use a method called contract-based underwriting to work out a contractor's mortgage affordability.

The method doesn't rely on accounts; rather, it uses a contractor's annualised contract rate to work out how much they can afford.

But there are times we face sorting out multiple income streams. These can present a challenge. 

When you add multiple earners into the mix, it gets even tougher.

How do you possibly sort the wheat from the chaff? 

How can a broker extract relevant earnings for borrowing purposes AND present them to a mortgage lender prepared to take a risk on that combined income?

In this industry wrap up of how brokers deal with such issues (and more) from Mortgage Solutions, myself, Simon Chalk from Age Partnership and Ross Murphy from Capricorn Financial Consultancy present our trickiest cases, and our solutions to them. Enjoy ►
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IT Contractor Mortgages | Freelancer Financials

IT Contractor Mortgages | Freelancer Financials | Contractor Mortgages | Scoop.it
You're an IT Contractor earning a decent living. So why won't High Street banks give you a mortgage that befits your income? Here's your solution:
John Yerou's insight:

There was a time when contractors only had two choices for getting a mortgage:

1. get a self-employed mortgage based on their accounts;

2. get a self-cert mortgage that circumvented the usual lending criteria banks and building societies insisted upon.

 

Neither played to the contractor's strengths. Self-employed mortgages rely on accounts and we all know how tax-efficient most contractors are.

 

Self-cert mortgages would take on board their income, but the interest rates made your eyes water. It's no wonder they were the first to go after the credit crunch.

 

Things changed when the Halifax recognised the need to offer bespoke underwriting terms to the IT contractors they had working on their own digital banking system.

 

So was born the contractor mortgage and in the early days, it was only IT contractors of whom these bespoke terms were availed.

 

While there are many more lenders offering contractor mortgages today, many of them will still only accept contractors from the IT sector.

 

Despite what you may think having trawled the High Street, these mortgages include your company's retained profits, not exclude them.

 

Our updated guide has all the details for you so that you don't have to settle for a mortgage that uses accounts or payslips - we all know that they don't reflect your top line income.

 

You've worked hard to establish yourself in your field and you shouldn't have to forego tax-planning to secure the mortgage your specialist skills deserve. Now, you don't have to!

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What are contractor mortgages?

What are contractor mortgages? | Contractor Mortgages | Scoop.it
Do contractor mortgages exist? If they do, what exactly are they? Moreover, how does a contractor get a hold of one? It's easier than you think:
John Yerou's insight:

I've said it before and I'll say it again: the High Street is a death trap for contractors looking to secure a mortgage.

So few High Street lenders grasp how the limited company payment structure works (or contracting at all) that they'll pigeonhole any independent professional who walks into their branch "self-employed".

"What's wrong with that?", you say. "We are self-employed."

True, you are. And have no doubt spent a good while proving that you are a genuine independent professional in the eyes of the tax man.

But for mortgage lending purposes, there is a better way for contractors to buy their home rather than using their accounts.

For a start. If you're new to contracting, you simply won't have the 2- to 3-years' accounts the High Street demand.

And secondly, if you (or your account) have deployed a streamlined tax-planning strategy, it's likely that your 'salary' shows that you 'take home' very little; certainly not enough to afford the mortgage on a home that befits your income status.

There is a better way for contractors to buy a home. It's less fuss, often quicker and most important of all, it works on the value of your contract, not your accounts.

It's called "Contract-based underwriting" and, as the name suggests, underwrites your mortgage loan based on your annualised contract value.

Do yourself a favour. If you do pop into your local branch and enquire about a mortgage, ask them what they believe a contractor mortgage is.

If they mention 'self-employed' or 'accounts' or don't mention 'contract-based underwriting', thank them for their time and be on your way. Here's the best way for contractors to get a mortgage based on what they earn, not their salary, dividends and accounts: http://ow.ly/TZkm5

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What’s the difference between freelancers and contractors?

What’s the difference between freelancers and contractors? | Contractor Mortgages | Scoop.it
With no legal difference between freelancers and contractors, does it matter how mortgage lenders class the way you work? You bet! Here's why
John Yerou's insight:

Contractors and freelancers: two different definitions that describe the same way of working?

 

When it comes to battling it out for assignments, the client may not care whether you class yourself as a contractor or a freelancer.

 

When it comes to applying for a mortgage, though, perceptions change.

 

Yes, both sets of independent professionals may work on short term contracts. But some contracts are more equal than others.

 

Mortgage lenders want security. The ad hoc fashion way of working typical of many freelancers won't in itself engender the faith in a lender.

 

Show accounts that demonstrate your ability to win freelance projects on a regular basis and you'll start to make inroads.

 

For contractors, their short term assignments tend to be more substantial. They endure for 3-, 6- or even 12-month periods at a time.

 

Whilst this won't fit the typical High Street lenders model, by going through a specialist broker who deploys contract-based underwriting a contractor can get a mortgage that reflects their earnings potential.

 

Our FAQ kicks off with the difference between contractors and freelancers from a mortgage lenders perspective to give you an idea what you're up against. Enjoy!

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Can umbrella "employees" get contractor mortgages?

Can umbrella "employees" get contractor mortgages? | Contractor Mortgages | Scoop.it
Using umbrella payslips to prove mortgage affordability just confuses High Street lenders. A specialist broker will see what you're really worth.
John Yerou's insight:

Not knowing whether they should use their employee status or contractor status to apply for a mortgage is often a common conundrum for umbrella contractors.


It needn't be. But this is what usually what happens.

A contractor has been working through an umbrella for a while and has a draw/inbox full of payslips.

They take this bunch of payslips, expecting the mortgage lender to be bowled over by their self-sufficiency. Nuh-uh.

The in-branch adviser is confused by them, doesn't understand why there's two lots on National Insurance on there and, when it comes to security, they're shocked that you can only guarantee that income up unto the end of your current assignment.

It's not ideal. But there is an answer.

Contract-based underwriting is a way to secure a mortgage based on the value of your annualised contract and calls for no accounts or payslips whatsoever.

Moreover, by dealing with underwriters who 'get' contracting, they understand the nature of short-term contracts and use appropriate risk-assessment criteria.

If you're an Umbrella contractor looking for a mortgage, don't risk facing the rejection the High Street holds in wait for you.

 

Talk to people who not only understand contracting, but can use it to get you’re a mortgage that your income potential deserves!

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I’m near the end of my contract; can I still get a mortgage?

I’m near the end of my contract; can I still get a mortgage? | Contractor Mortgages | Scoop.it
Life, huh?! You see the home of your dreams when you've only got 3 weeks left on your contract. But you need a mortgage. Now! You have options.
John Yerou's insight:

Why is it that gift horses always come along when you're looking in the other direction?

 

It's like that with homes. You hunt high and low - online and on the High Street - and find nothing.

 

Then, when you're cruising down a country lane on a Sunday afternoon, there it is.

 

It's as if the hedgerow parts, the sun pops up directly from behind one of the two chimneys, the one that's smoking from the log burner you're picturing in your mind's eye and your dream home is there, perhaps where it's been all along.

 

You can't plan when your 'forever home' or your bangin' bachelor pad is going to find you. And Murphy's Law says that when it does, you've only got a week or two left on your contract.

 

Thankfully, for our clients, only having a short duration left to run on a contract needn't be a problem when it comes to securing a mortgage.

 

We work with contractor-friendly underwriting teams direct. This gives us leverage in exceptional circumstances that many other brokers cannot touch.

 

Your first port of call is always to approach your client or agency for an extension. If you explain that you need it for a mortgage, they're often obliging.

 

On top of securing you your next assignment, it also shows a lender that you're worthy of their investment. That's always a good thing.

 

But if that's not possible, it's not the end of your quest for a mortgage. Our FAQ has more »

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Rise in BoE Base Rate – Good or Bad for Borrowers?

Rise in BoE Base Rate – Good or Bad for Borrowers? | Contractor Mortgages | Scoop.it
With the rise in the BoE base rate imminent, thousands flock to remortgage. But (how much) will the rise (forecast at +0.25%) affect borrowers?
John Yerou's insight:

So, when are we going to see the Bank of England raise their historic low base rate of interest?


We've been lucky to hold on to the 0.5% for as long as we have, but the grace period the BoE gave us to recover from recession is soon to end.


To date, both Santander and Barclays have withdrawn or raised the interest rates of their lowest mortgages.


On the contrary, HSBC and Coventry have dropped theirs to try and gain market share until the rate rises.


So, what do these mixed messages mean for freelancers and contractors who may be in the market for a mortgage around about now?


If you're looking to remortgage, you're not alone. 24,000 homeowners locked in a fixed rate in June, with many more expected to follow.


For those looking to get onto the property ladder, the messae remains the same:
► irrespective of interest rates on the High Street, you need a specialist broker who can make the most of your contract to get you a competitive mortgage that reflects your true affordability.


There are many signs of change in the way mainstream banks operate; sadly, few of those changes include incorporating contract-based underwriting as an in-branch product.


Our latest post explains the whys and wherefores in more depth. 

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The Contractor Lifestyle: Does it Live Up to the Billing?

The Contractor Lifestyle: Does it Live Up to the Billing? | Contractor Mortgages | Scoop.it
Most of our clients are contractors so, yes, we know the field. You'd think they're masochists, but they LOVE the lifestyle. Could you hack it?
John Yerou's insight:

The number of self-employed people in the UK continues to rise. As such, we thought we'd put together an informative post about what becoming a contractor really entails.

 

From ad-hoc freelancer or full time employee, the leap to full-time contracting can be huge.

 

You've earned your stripes and made a name for yourself carrying out your service. But can you hack the business side of limited company contracting?

 

From first-hand experience, we understand the concerns that stepping out on your own conjures:
» how will I handle the accounts/the taxman?
» can I market my business enough to ensure a steady flow of work?
» where do I pitch my contract rate to make sure I get what I'm worth, but not scare the clients away?

 

Most successful Limited Company contractors employ a mix of tactics. They first decide which aspects they are comfortable dealing with.

 

Then, if a task falls outside their remit or hampers theirs path to success, they bring in specialist help. Business elements like:

» contractor-savvy accountants,
» IR35 auditors,
» even marketers to help develop their brand
- they're all considerations for out-sourcing.

 

If you're considering making the leap to contracting, be sure you know what you're up against, first. Our unbiased approach in the latest post does a great job of highlighting the ups and downs.

 

Which is which for you will depend upon your level of expertise and experience. Forewarned is forearmed, so they say.

 

Go, stock up your arsenal and get ready to take on all-comers. You'll be so glad you did »

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Why you should consider limiting your contract earnings

Why you should consider limiting your contract earnings | Contractor Mortgages | Scoop.it

The three latest posts on our Contracting Matters blog represent something of a learning curve for yours truly.

 

Contractors don't waste time applying for a mortgage when they realise how much more:
• they can charge for their services as a self-employed entity;
• of their earnings they can keep with a bit of savvy (but totally above-board) tax planning.

 

What many are not so sure of is how they should trade.

John Yerou's insight:

I was just going to write a one-off article about the differences between contracting through an Umbrella and a Limited Company.

 

Before I committed anything to digital ink, a moment of apprehension blotted the sun for a second.

 

Did I really know enough to make that call? Deciding I didn't, I called one of our partners, a well-savvy contractor accountant.

His advice blew me away.

 

Long story short, we now have three guides that give a complete comparison between Limited Company Contractors and Umbrella Employees:

» a Guide to Umbrella Companies for Contractors;
» Why Contractors Choose the Ltd Co Payment Structure;
• and finally the article I set out to write:
» Umbrella vs Limited Company; which is the best for Contractors?

 

My latest LinkedIn Pulse post has snapshots of the accountant's process and links to each of the guides.

 

It was something of a leaning curve for me. If you're considering contracting, it's worth taking a look at these impartial guides.

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Why contractors choose Limited Company payment structures

Why contractors choose Limited Company payment structures | Contractor Mortgages | Scoop.it
Ever wondered why the Limited Company structure is first choice for contractors every time? Because they're worth it! You'll think so, too »
John Yerou's insight:

Most contractors make more money than their permanently employed peers. That's by no means a bad thing.

 

They are responsible for continuity of work, marketing, tax-planning - all sorts of elements of business a direct employee never has to concern themselves with.


My point is this. It's great to see the employment figures swelling with independent professionals, making a fist of it. But most are missing out by using the wrong payment structure.


Granted. There are times when the Sole Trader or Umbrella route may be the right option.

 

Testing the contractor lifestyle, between roles or even caught inside IR35 - any of those make creating your Limited Company a fool's errand.


But those scenarios are the minority. The vast majority of contractors **are** in it for the long run.

 

They've set themselves as a specialist and could see no other way of working from hereon in.


What they're not doing is maximising their income (in a legitimate way) by creating their own limited company and employing a contractor accountant to manage their books.

 

People take a sharp intake of breath when you mention accountants. But would so many be in existence if they weren't worth the outlay?

 

They're not just there to keep contractors outside IR35. Their in depth knowledge of tax planning for contractors could save company directors much, much more than their services actually cost.

 

When it comes to the contractor seeking other finance, having a business separate from personal debt is also a boon, for the contractor, for us and the lender in question.

 

Unless you're earning under £30k, there really is no reason why you shouldn't at least consider setting up your own limited company. With the right assistance from the get-go, it really isn't as difficult as you might imagine »

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Leeds BS Contractor Mortgage Lending Criteria

Leeds BS Contractor Mortgage Lending Criteria | Contractor Mortgages | Scoop.it
Few lenders offer as wide a range of contractor mortgages as Leeds. Interest-only, buy-to-let, repayment and offset mortgages are just the highlights.
John Yerou's insight:
We spent a while courting Leeds Building Society. So when they asked us to play a role in their contractor mortgage pilot programme, we were thrilled. 

Little did we know at the time how extensive the range of mortgage products Leeds now offers to independent professionals was to become. 

In essence, the building society has offered its entire portfolio of products to the contracting community. 

But, as with all contractor-friendly mortgage lenders there are specialist underwriting criteria to qualify for a mortgage loan using contract rates as the base of affordability. 

Given the extent of the mortgages on offer, we've added Leeds BS to our 'Best Contractor Mortgage Lenders' summary.

We've added a page dedicated solely to their lending criteria, which includes:
• no restriction on profession; Leeds welcomes all contractors; • a comparatively low earning threshold;
• mortgages for older contractors, going well past 'retirement age'; 
• extensive range of mortgage products, including: 
» offset;
» fixed, tracker and variable rate;
» interest only;
» plus commercial mortgages (buy-to-let) and HMOs. 

If you've had little success on the High Street to date, Leeds BS may offer you the step up you've been missing.

The building society's full, flexible lending criteria for contractors is here: https://www.freelancerfinancials.uk.com/guides/leeds-bs-contractor-mortgage-lending-criteria/
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You can get a self-employed mortgage with just one year's accounts

You can get a self-employed mortgage with just one year's accounts | Contractor Mortgages | Scoop.it
It's never been easier to get a mortgage with only one year's self-employed accounts. You just need a broker who knows what they're doing.
John Yerou's insight:
Back way back when, getting a self-employed mortgage even with a solitary year's trading behind you was (almost) a given.

Walk into your local branch. 

You knew them, they knew you.

Self-certify your earnings, et voila. The keys to the door were as good as yours.

But then the housing bubble burst, the credit crunch bit and the Mortgage Market Review gave rise to the more secure 'responsible lending' guidelines to which all mortgage lenders had to adhere.

But here's the thing. Some lenders continue to implement those guidelines to the nth degree.

Other lenders have begun to take a more relaxed view, interpreting those guidelines in a way that gives them access to borrowers with a potentially higher risk factor.

We can deservedly take some of the credit for that.

We've shown some of these lenders how to extract true affordability from certain applications and from all manner of self-employed professionals.

True. Some lenders stick to the minimum 2- or 3-years accounts they demanded from sole traders, freelancers, contractors and company directors before our intervention. 

Others ran with us and said,
"Y'know? We can work with sole proprietors who've only been trading a year. Yep. We'll give it a shot."

The caveat for these innovative lenders is that we vet applicants so that their underwriters can see their true affordability in an instant.

If you're looking for a mortgage, but only have one year's accounts DON'T be put off by High St rejection.

We can help and, in order to prevent your credit score being affected by failed searches, the sooner you come to us the better.

Our FAQ has more for you.
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Budget launches yet another attack on contractors working through personal service companies

Budget launches yet another attack on contractors working through personal service companies | Contractor Mortgages | Scoop.it

"The budget's changed how public sector contractors must work, moving from off to on payroll (PAYE). How does the Chancellor keep getting it so wrong?"

John Yerou's insight:
The fallout from the budget for the Chancellor and Tory party has been horrendous.

The Shadow Chancellor has called into question Mr Osborne's fitness for purpose for the role.

The welfare secretary and former party leader Iain Duncan Smith has resigned from the cabinet. He cited the proposed cuts to disability welfare as 'a compromise too far'.

Ironic, considering IDS's bills saw some of the most damaging effects on society during the coalition…
…even more ironic now that Mr Osborne has since U-turned on those proposals.

Whatever turmoil the government may been is nothing compared to the impact one of the changes in the 2016 budget will effect for next April:

Public Sector engagers (clients) will be responsible for deciding a contractor's tax status.

This decision is wrong on so many levels, we've had to take a stand. 

Our latest 'Contracting Matters' blog post examines the changes to public sector contracting. 

Moreover, it looks at how being 'on payroll' could impact a contractor's mortgage affordability, should a Public Sector client decide that's how they want to pay them.

Accounts will be messy for contractors who work on both Private Sector and Public Sector contracts in the same tax year will face an uphill struggle to prove their status, thus affordability for any type of finance.

And the worse thing? 

These changes could make so much additional work for the taxman that they render themselves useless. Nay, they may yet cost the taxpayer more than the paltry 'savings' the changes will bring in.

It's this more than anything that shows the disconnect the Chancellor - and government as a whole - has with the self-employed community. And that's despite having the results of a study the government itself commissioned at their disposal ahead of the 2016 Budget. 

What a farce. But still, it's no use ignoring these changes. All we can do is abide by them and hope that common sense will one day filter through to the Houses of Parliament.

Why? Because now more than ever, contracting matters!
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How to minimise the incumbent risk of self-employed mortgages

How to minimise the incumbent risk of self-employed mortgages | Contractor Mortgages | Scoop.it
How lenders view your self-employed business will affect which mortgages they offer you, if any. Don't obscure that view; it's not worth the risk!
John Yerou's insight:

 

What's the best way a freelancer can prove their income for a mortgage?

 

A mortgage lender will assess a freelancer's suitability for a mortgage based on what they can glean from their accounts.

 

It's the closest they can get to aligning a self-employed person with their bank's affordability criteria, a calculation which they've probably based on salaried folk.

 

Where it becomes difficult for freelancers is getting the right balance. On one hand they're conscious of the volume of income going through the books for tax purposes.

 

On the other hand, if they record a reduced amount, they know they risk not securing a decent mortgage, either by volume or competitive interest rate.

 

One thing's for certain: if you're not declaring your full income, you're not only doing the taxman out of his dues, but you're sabotaging your chances of getting a mortgage that reflects your true income.

 

But we live in the real world and often, it's how much self-employed let legitimate tax relief affect their net take home that's the real issue.

 

What freelancers need to do is be prepared and expressly clear! A specialist broker can help on both counts, preparing you and your books for scrutiny by the lender.

 

If the broker truly knows their field, they'll take one look at your accounts and either advise your best course of action to start the mortgage process there and then. Or they'll recommend what you need to do to get your application ready in the future.

 

If all lenders assessed the self-employed in the same way, it would be a doddle. But they don't; all have their own bespoke underwriting criteria.

 

Don't ruin your chances of a mortgage or your livelihood for the sake of saving a few quid in task; it's not worth the risk!

 

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IT Contractor Mortgages That Reflect Your Status

IT Contractor Mortgages That Reflect Your Status | Contractor Mortgages | Scoop.it
As an IT Contractor earning top dollar, you want a mortgage that reflects your status. But the mortgages you're offered are tiny. Why is that?
John Yerou's insight:

You've taken the brave step of creating your limited company to offer your IT services on a contract-to-contract basis. 

 

You know that you can provide:

• clients - or 'engagers' as they're now being called - with a bespoke service that they're prepared to pay a little more for because they don't have to find you another job once you've set their IT system up;

• you and your family a better lifestyle with the proceeds.

 

What you didn't know was the battle you'd have on the High Street to get a mortgage that reflects your income and professionalism.

 

Times have certainly changed since the credit crunch. Many of the mortgage products that were available during the housing boom, for instance, are either unrecognisable today or have disappeared from lenders shelves forever.

 

What hasn't changed, unfortunately, is mainstream lenders' attitude to contractors.

 

Yes, Halifax got the message. They saw that the IT contractors they outsourced were earning a better than average income and created the contractor mortgage process to accommodate those high earners.

 

But the rest of the Big Four? They still try and palm IT contractors off with a self-employed mortgage that relies on accounts.

 

As your payment structure is a Limited Company, your accountant makes sure you claim all the tax relief available, which affects your effectual 'take home' pay considerably.

 

You know what you're worth, as do we. But try getting a High Street lender to see your value through your books. In most instances, it's not gonna happen.

 

Our latest on C&F Mortgages looks at all the types of mortgage on offer to IT Contractors and how IT professionals can leverage their contract to get a mortgage that befits their status.

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FAQ: Everything contractors need to know about mortgages

FAQ: Everything contractors need to know about mortgages | Contractor Mortgages | Scoop.it

Twenty-One Frequently Asked Questions About Contractor Mortgages: ANSWERED!

John Yerou's insight:

If I had a pound for every contractor who'd come to us after being let down by High Street mortgage lenders!

 

Admittedly, it can get confusing. One contractor says to another, upon hearing them mention they're on the lookout for a mortgage, try "X, down the High Street. That's who I've got my mortgage with."

 

The contractor, full of hope and expectation as they're earning more than they've ever done, turns up with their accounts.

 

It takes both parties, advisor and contractor, only about two minutes to realise that the application's going nowhere.

 

Confused as to why they got offered so little, the contractor then turns to us.

 

The reason in-branch staff work off accounts is because that's how they've been taught.

 

They know nothing of the method of Contract-based Underwriting that underwriters process at head office.

 

They're equally in the dark about working out how much a contractor is worth, either with accounts or their contract.


Contractor Mortgages remain a specialty field. Going through a broker who understands the way both the lender and the contractor works is essential.


Our 21 top questions, from the difference between freelancing and contracting to mortgage completion, should help you understand the process a little better - even if your friends at your local branch don't.


Questions? Just fire them at us. We're here to help, every step of the way.

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What documents do lenders need with my mortgage application?

What documents do lenders need with my mortgage application? | Contractor Mortgages | Scoop.it
As a contractor, you only need a handful of documents to prove your mortgage affordability. Clue: the answer won't lie in your accounts!
John Yerou's insight:

One of the many benefits of contract based underwriting is that it only calls for minimal documentation to support your mortgage application.


You don't need the accounts that High Street lenders insist upon asking for ot qualify for a contractor mortgage.


For limited company contractors more than most, it's the value of their contract moving forward that's the most critical aspect to determine affordability, not what they've earned in the past.


The list of documents you'll need are:
• your contract;

• 3-months bank statements;
• proof of ID;
• and if you're newer to contracting, you'll need a verifiable copy of your CV.

 

The last item is so that the underwriters can check that their money's safe and you are indeed contracting in a sector where you've had recent experience.


The added bonus, when you go through a broker who understands how to package these documents so that underwriters can see your true affordability in an instant, is time.


Because there's so little documentation to check and it's presented to them in a way they like, it can take as little as 4 weeks from application to completion. Sometimes, even quicker than that!


If you've been to the High Street, the bank's asked you for accounts or had all of the above and still rejected you, they've no concept of the way you work.


Yes, you're self-employed. But you don't fit their 'accounts' model for sole traders because your accounts are streamlined for a tax-planning strategy.


Here's a little more info about the documents you need to support a contractor mortgage application and why they work so well:

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Do I really need three years' accounts for a contractor mortgage?

Do I really need three years' accounts for a contractor mortgage? | Contractor Mortgages | Scoop.it
High Street lenders rarely offer bespoke mortgages for contractors. If they use your accounts, you won't get the mortgage your income merits.
John Yerou's insight:

Breaching the barrier of accounts is a problem for many contractors, especially those new to the lifestyle.

 

But even those who've been contracting for a while face unforeseen barriers on the High Street.

 

The problem is, most lenders have one policy for *all* self-employed people. And that policy calls for reams and reams of accounts.

 

As a tax-savvy contractor or freelancer operating through your own limited company, your accounts will only reflect what you're truly worth if you have a working knowledge of a company's retained profits.

 

The vast majority of advisors in branch are not trained to pick out that detail, thus will not recognise your wealth.

 

Instead, they'll use your drawings and salary - that you keep low for said tax strategy - to work out your mortgage affordability.

 

Don't Panic! There is another way: Contract Based Underwriting.

 

It doesn't call for accounts or payslips; it uses your annualised contract value.

 

This gives you access to much more funds than early-year accounts and, dealing through specialist underwriters as we do, makes sense to those who have the power to grant your mortgage loan.

 

3 years accounts for contractors? Not on our watch! Our FAQ has more for you.

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I’ve won my first contract; how long until I can get a mortgage?

I’ve won my first contract; how long until I can get a mortgage? | Contractor Mortgages | Scoop.it
Even from day one, contractors can benefit from contract-based mortgage underwriting. We don't your need accounts to prove your affordability!
John Yerou's insight:

It's understandable; you:

• are a contractor;

• have just won your first contract;

• realise how much your accountant can save you on your tax bill;

• want to buy a home that reflects your new found affordability status.


You're not the first contractor to want to invest in a new home straight away and you won't be the last, by a long shot.


The problem is, High Street lenders won't touch you with a barge pole. To them, you're self-employed, have no trading history and are, in fact, a liability to them.


We think that's wrong, and have thought it wrong for more than a decade.

 

That's why we developed Contract-Based Underwriting with underwriters from select mortgage lenders, some mainstream, others less well known.


The process doesn't take in your previous earnings as an employee, nor does it take into account self-employed accounts. They mean little when it comes to working out your affordability as a limited company contractor or freelancer.


Instead, we can offer you a decision in principle - even from Day 1 of your first contract, providing you have recent history in the field you're going to contract in - within 24 hours.


We know what to look for in a contract; we know how to package your application so that underwriters see the potential we can see, too.


Don't waste your time on the High Street - they'll treat you as unemployed, ask for accounts, your shoe size and the colour of your socks on your first day at senior school.


Okay - maybe not the last two; but the point is, the way High Street lenders work out mortgages for self-employed people is *IRRELEVANT* to limited company contractors.


Question 3 in our FAQ has more detail about how you can get a mortgage at the beginning of your contracting career for you.

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Why High Street lenders let contractors down

Why High Street lenders let contractors down | Contractor Mortgages | Scoop.it
You're earning more than ever as a contractor, but can't get a decent mortgage. It's NOT your fault. Here's why High Street lenders get it wrong:
John Yerou's insight:

It's so frustrating. Contractors, earning more than they've ever done, come to us despondent, almost disbelieving.

 

They've applied for a mortgage at their local branch yet have been turned down flat, and with neither a thank you nor an explanation.

 

There are two conceivable reasons why you, as a contractor (especially in the early years), have found no joy on the High Street.

 

The first is that the bank doesn't distinguish between contractors, freelancers…in fact, any type of self-employed worker.

They're all lumped together.

 

The second is that they've asked for accounts, a particular stumbling block for contractors in their early days.

 

Accountants do a great job of planning your tax efficiency, but that doesn't translate well in front of a mortgage adviser.

 

But those scenarios are NOT the same industry-wide. There are specialist brokers who understand contracting; they, in turn, work with underwriters similarly conversant with the way limited company contractors pay themselves.

 

If you've been turned down on the High Street, all is most definitely not lost. Our guides expalin why most High Street banks aren't contractor-friendly…

…but more importantly, what you can do about it. Enjoy »

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5% Deposit Mortgages for Contractors Return With Help-to-Buy | IPSE

5% Deposit Mortgages for Contractors Return With Help-to-Buy | IPSE | Contractor Mortgages | Scoop.it

Since its launch in 2013, the Conservative’s Help to Buy scheme has helped many people across the UK buy their first homes with as little as a 5% deposit. Now, Contractors can access H2B, too.

John Yerou's insight:

Contractors can get on the property ladder with only 5% deposit to put down!

 

Back in the day (before the credit crunch), 95% Loan-To-Value mortgages were a staple of lenders' portfolios.

 

With the responsible lending attitude that followed the popping of the housing bubble, the entry-level to homeownership became much higher.

 

15% deposits became the new lower threshold. Some braver lenders offered 10% deposit mortgages, but they carried a hefty interest rate.

 

Help-To-Buy has helped level the playing field. In some ways, this government initiative has returned us to a time when 5% deposit mortgages were off-the-shelf mortgage products.

 

In the two years since its launch, H2B has helped many people become homeowners, a distant dream only a few short years ago.

 

What many contractors don't realise is that they can access Help-To-Buy, too.

 

True, the most competitive rates today kick in when you have 10% to put down. But many, new to the contractor lifestyle, don't want to wait that long.

 

There's a good argumane that independent professionals can make Help-To-Buy (Equity Loan) work better for them than most permies can.

 

If you're sick of bunking up with your parents or can't wait to save a larger deposit, our latest IPSE article (through the title link) has more.

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Which is best for contractors, umbrella or limited company?

Which is best for contractors, umbrella or limited company? | Contractor Mortgages | Scoop.it
Bona fide reasons exist for contractors to go either the Umbrella or Limited Company route. Earnings often prevail, but do know your options:
John Yerou's insight:

This Umbrella v Limited Company guide is the final of three articles looking into key differences between the two types of contractor payment structures.

 

We've not gone into this topic lightly. From our point of view, we know the weight mortgage lenders put behind a limited company contractor's application

 

We also know the confusion an Umbrella employee's payslips can cause.


But what was confusing us was why nothing like the 90% of contractors who'd be better off operating in this manner was representative in our ratio of actual clients.


Okay, we know that some contractors would be tempted by Umbrella companies that offer massive retention.


Our opinion of them was confirmed by the expert we drafted in to help with these articles.


But we knew that anyway, as mortgage lenders won't touch any umbrella contractor whose structure runs through an offshore trust. Their investment is just not safe enough to warrant the loan.

 

That's pretty much what our contractor-savvy accountant said, too.

 

So, why don't nine in ten contractors use limited companies as their payment structure?

 

All we can think is that they think it's too in-depth. That running a business and providing their skillset or service is too much of an ask.

 

It's easy for us to say: that's bunkum. Most successful Limited Company contractors don't get involved in the majority of the admin.


That's what they hire contractor-savvy accountants for. It leaves the contractor free to do what they do best; the accountant will more than pay for themselves through tax planning, which happens to be what they do best.


That's all we can put this anomaly down to. Unless you're:
> earning less than £30k a year;
> are inside IR35, or
> think that contracting is only a temporary measure,
there's no reason to go the Umbrella route. You're missing out on a whole lot more than just a few bob extra in tax savings.

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