Contractor Mortgages: What You Need to Know About Self-Employed Applications

Contractor Mortgages: What You Need to Know About Self-Employed Applications

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The Difference Between Self-Employed and Employed Mortgages
Contractors often fall into the self-employed category when applying for a mortgage. This means that instead of providing pay slips like a salaried employee, you need to prove your income in different ways. Lenders treat self-employed applicants differently, which can sometimes make the process seem more complicated.

Key Documents for Self-Employed Contractors
To prove your income as a self-employed contractor, you'll need to provide:

SA302 Tax Returns: These show your annual income and tax paid.

Company Accounts: If you run a limited company, lenders will want to see your accounts, including profit and loss statements and balance sheets.

Bank Statements: Lenders typically request the last three to six months of personal and/or business bank statements.

Proof of Ongoing Contracts: Lenders want to see that you have stable and continuing work. This might include your current contract or evidence of previous contracts.

How Lenders Assess Self-Employed Income
Lenders generally want to see at least two years of financial records, but some contractor-friendly lenders will accept just 12 months of income information. Your income is usually averaged over this period to determine how much you can afford to borrow.

The Challenge of Inconsistent Income
One of the main challenges contractors face is inconsistent income. It can be harder to prove a steady income stream compared to someone with a full-time job. However, showing a history of renewing contracts and earning a solid rate can help.

How a Specialist Broker Can Help
A contractor mortgage broker can help you navigate the self-employed mortgage process. They understand how to present your application in the best light and know which lenders are more likely to approve your application.

Conclusion
Being self-employed doesn’t mean you can’t secure a mortgage. With the right documentation and support, you can prove your income and get the mortgage that fits your needs.

Need help with your self-employed mortgage application? Contractor Mortgage Solutions specialises in helping contractors secure mortgages with ease.