What’s the difference between a regular and a contractor mortgage?

Contractors can often find it slightly trickier to get a mortgage than permanent employees, so finding an efficient lender that specialises in contractor mortgages could mean the difference between purchasing your perfect home and drawn-out processes causing it to slip through the net.

Contractor mortgages were introduced when an increasing proportion of mortgage lenders realised that the traditional criteria used for assessing permanent employees were not appropriate for the contracting lifestyle – resulting in a large amount of contractors being refused for mortgages they would easily have been able to repay.

So, what are the key differences between a regular and a contractor mortgage?

Well, in some ways a contractor mortgage is no different to a regular mortgage, for example with regards to rates. The main difference between the two types of mortgage is actually the way in which the lender assesses your application. Contractor mortgage lenders will channel applications by bespoke criteria that have been designed specifically to suit the contractor community, rather than looking at traditional factors.

A contractor applying for a regular mortgage would have their salary assessed by either:

a) Your PAYE income, if you’re employed under an umbrella company, or

b) Your salary plus dividends, and/or net profits if you run a limited company.

This traditional approach can be very restricting in both loan amounts and also whether final approval is actually given to your application.

Contractor mortgages assess your application on the basis of your gross contract rate rather than concentrating solely on the way you get paid the way that regular mortgages do. Not only are they flexible but they are also able to offer extremely competitive rates.

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