There are an estimated 1.4 million British ‘freelancers’ working across all sectors of the UK economy; this figure includes sole-traders, directors of their own Ltd Company’s & ‘umbrella’ company workers. Predominantly, contractors/freelancers work in the IT & Programming industry (41% of all hires).
Traditionally, lenders & underwriters have only considered either ‘Net Profit’ or ‘Salary + Dividends’ when assessing ‘ongoing affordability’ for self-employed applicants. Fortunately, as the labour market has evolved, so too has the lending landscape. There are now a plethora of products & options available to freelancers/contractors with a large number of lenders now able to consider the ‘value’ of applicant’s current contracts i.e. (daily rate X number of days worked) X 48 weeks. Assessing applicant’s income on this basis tends to be far more generous than the simply looking at the level of salary & dividends distributed via Ltd Companies. Providers such as: Clydesdale Bank, Halifax, Nationwide BS, Metro Bank & Virgin Money are more than happy to assess applications in this way and offer flexible & understanding underwriting criteria which allow for gaps in contracts & holidays!
Furthermore, Halifax Mortgages are even willing to consider applications where applicants have less than 2 years contracting ‘track-record’ providing there is suitable/relevant PAYE experience.
The only requirements for ‘contractor’ mortgage applications are: copy of clients recent CV, copy of current contract (showing daily rate) & last 3 months’ worth of business bank statements.
Will contractors need to put down much larger deposits? No, LTV% and deposit requirements are identical regardless of whether you are freelance or PAYE.
Are the interest rates higher for specialist contractor mortgages? No, products/rates are identical regardless of whether you are freelance or PAYE.
Do I need to speak to a broker that specialises in ‘contractor/freelance’ mortgages? Capricorn are experts in arranging all types of mortgages and with lending volumes set to exceed £1bn in 2016.
Cleary there are advantages to being a contractor/freelance versus PAYE: increased flexibility, better work/life balance, more favourable tax treatment, ability to offset work related expenses. However, one of the major drawbacks is loss of traditional ‘Employee Benefits’ such as Health Insurance, Life Insurance & Sick Pay. Fortunately, as well as being experts in arranging mortgage finance for contractors/freelancers our protection team are on hand to put in place a tailored solution to fit your specific insurance requirements.