Mortgage Lenders: Friend or Foe?

 

 

As luck would have it, all is not lost. You do have a choice. A very important choice. You have the ability to decide which lender you approach. You must choose wisely of course, because some lenders are friends and some… Well, imagine yourself on your knees with your hand in your hands saying “WHHHHY?!?!” and you’re not far off. A situation you want to avoid at all costs, obviously.

 

The good news is that the amount of contractor-friendly lenders out there is increasing. Kensington became the most recent lender to join the growing number of options on the market for contractors on the lookout for mortgage funding. Kensington’s new range of contractor mortgage products, which are available for contractors within any profession and are subject to a minimum contracting history of 12 months, make it a solid option. 

 

Income is defined based on a calculation the contractor’s weekly rate x 46 (i.e. the number of working weeks in the year). Rates start from 3.44% for two year fixed products at a loan to value ratio of up to 75%, with a completion fee of £999 and an administration fee of £100. For many contractors, Kensington could now be the companion of choice. 

 

However, whilst more and more banks are recognising the benefit of a beautiful mortgage-related friendship with contractors, unfortunately with some lenders it’s not all hunky dory.  Have you ever been invited to a party, but when you’ve got there, you’ve been completely shunned by the host? Well, some banks have similar strategies when it comes to contractors.

 

“The contractor who approaches a bank directly to tentatively enquire about a mortgage will, in most situations, be advised by the lender in question that their mortgage application will be considered.” Steve Clements, Senior Mortgage Consultant at Contractor Mortgages Made Easy, says. “To avoid any deception, it is important for contractors to be aware from the outset that some lenders are far more flexible towards contractor payment mechanisms than others.”

 

Let’s take Lloyds Banking Group, for instance. If you want to try and score an approval on your mortgage application with them then you will be required to provide evidence that you have a minimum of 12 months of continuous employment with your current employer, and, if you can’t prove that you’ve had more than two years of continuous service in the same type of employment, you’ve got to have at least six months of the contract remaining. This criteria is pretty demanding and rules out many contractors who are operating in a profitable and successful manner.

 

Then you have Halifax. Halifax is Lloyds Banking Group’s younger, more easy-going sibling. Its contractor policy is open to any profession, and there are options available to borrowers who are new to contracting. In many situations, Halifax and contractors are like fish and chips; a match made in heaven.

 

How about HSBC contractor mortgages?  If you want to get in with HSBC, you’ve got to have a good employment track record, the length of your current contract has to be sufficient and they also assess the likelihood of continued employment in your chosen field. Oh, and we should also mention that your income will be defined via complex documentation such as tax returns, audited company trading accounts and/or payslips. HSBC will have contractors jumping through a long line of hoops, so they aren’t going to be the best lender to recruit for anyone not up for a spot of hopping. 

 

In contrast, one long-time companion for many contractors is good old Clydesdale Bank, who has always been open-minded when it comes to contractors. Clydesdale usually works on an annualised multiple of the contractor’s daily or hourly rate, which negates the need for complex documentation to prove earnings. Their flexibility towards contractors makes them a good choice of steed in your quest to obtain mortgage funding as a contractor. 

 

The decision surrounding which lender to approach may seem like a daunting one, but seeking some guidance from a specialist contractor mortgage consultant can help you to find the ultimate ally to assist you in your quest for a mortgage. It is certainly true that some lenders are less friendly than others, but with more and more lenders opening their criteria to contractors, there is optimum chance for savvy contractors to be successful in the pursuit for a contractor mortgage. Hurrah!