A mortgage is likely to be the biggest financial commitment that you will ever enter into & there are a host of banks & lenders offering a mind-boggling array of different mortgage options & deals.
But frustratingly, many of these mortgage options & deals are cut short when it comes to contractors. Whether you operate through a limited company or switch to an umbrella company in the future, the reality is that most banks & lenders simply don’t understand the way you work as a contractor.
When lenders assess a contractor mortgage, they will typically want to verify income by seeing two to three years’ worth of accounts or tax returns. Tricky if you’ve just started out as a contractor.
Moreover, limited company contractors will quickly find that lenders won’t take their full income into account, as any money retained in the company, for tax planning purposes, will not be considered. This means you’re unlikely to be offered a loan reflecting your true borrowing potential.
However, let’s say you can overcome this first hurdle, you will then face another challenge. Generally, banks & building societies only lend to those who are considered low risk, & contractors just do not tend to fall into this category. The reason being is that lenders worry that these individuals will struggle to afford their monthly payments when their current contract comes to an end.
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