Even though the majority of contractors have greater earning potential than their counterparts, when it comes to getting a mortgage, this often counts for nothing. Many contractors face problems when applying for a mortgage, as the majority of high street lenders are set-up towards lending to employed people. The sad fact is that most lenders simply do not understand how contractors work.
For the majority of contractors, insufficient trading history or accounts, is often the main reason for having their mortgages applications rejected. Banks and building societies want to see a minimum of 2-3 years audited accounts. They will typically assess your affordability based on salary and dividends drawn – in other words, just the taxable element of your earnings.
For contractors trading through a Limited Company this can present a problem when applying for a mortgage. Most prudent contractors operate in a tax efficient way by drawing a minimum salary and restricting dividends to avoid higher rate tax. Perfectly good tax planning, under normal circumstances. However, the downside is that prudent tax planning has the unintended effect of reducing your potential borrowing.
An experienced mortgage broker will be able to talk you through the process on how best to present your mortgage application.
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We have a range of calculators to help make things simpler for you, from calculating payments to understanding how much your stamp duty may be. These calculators are for guidance purposes only.
Our mortgage brokers offer mortgage advice on a wide variety of mortgages, more detailed information about the different mortgages can be found below.