Lenders use a wide range of approaches when it comes to calculating the affordability of self-employed contractors. Because contractors have unique financial structures and lenders pay their large mortgage based on their affordability. This is advantageous, as self-employed contractor have a large pool of abilities to repay a mortgage. But in general, their complex income streams are always a key challenge for lenders.
However, to receive a mortgage, contractors are seen as high net worth customers. On the other hand, the attitude of many lenders to self-employed contractors, who place more emphasis on their annual profits, makes it difficult to obtain a large mortgage. Because contractors do not have permanent employment contracts, we want to mention 5 tips here to show your abilities well.
Update your financial statements
Of course, this is a clear issue for many contractors, but the importance of doing so is vital. First, you need a valid and current contract. Lenders will ask for your documentation, which will likely include a list of your future expenses and income. They are always looking to find a stable, profitable income for at least two or three years. Private lenders, however, often overlook these restrictions, especially if you have a list of fixed contracts in a particular business. Meantime, because your average income can indicate your business’s continuous growth, your assets and your business type are also important. So updating your financial statements will help you get the best large mortgages.
Make your credit score clear
Unpaid installments are a negative point to receive a large mortgage. Mortgages that have late installments or have not been repaid at all, as well as credit card overdrafts, affect the credit profile of contractors. Meantime, some contractors employ smart accountants. They incur some current expenses in their financial accounts, such as travel expenses, to pay lower taxes. But it does reduce your profits. This means that your profit and loss statements are misleading, which will affect the lenders’ decision. So it would be best if you tried to keep your financial accounts as transparent as possible.
Make your contracts timeless
A significant advantage of contractors is their ability to create time intervals between their contracts. But it does affect the lender’s decisions. Lenders review the contracts and employment documents within 12 to 24 months, ensuring no more than 8 weeks between the two contracts. However, documents related to your contracts allow lenders to assess risk accurately and put them in a better position. So if you have transparent financial statements, you will have a better chance of getting large mortgages. Even if you are a first-time contractor, do not worry; you can talk to AWS Mortgage specialist advisors to introduce your alternatives for receiving a mortgage. With years of experience, AWS Mortgage advisors can offer you various options based on your affordability.
Deposit is essential
Our experiences have shown that the best contractor’s mortgages depend mainly on their deposits. The amount of deposits paid by contractors dramatically influences the lender’s decision. But if you cannot pay a significant deposit, it is better to talk to AWS Mortgage advisors to offer you the right solutions.
Use a specialist contractor mortgage broker
Lenders need to assess several factors in their mortgage calculations for contractors. But many high street lenders are not familiar with contracting and related contracts. For this reason, we recommend that you use a specialist contractor mortgage broker. As a contractor mortgage broker and having numerous experiences, we can present your capabilities to lenders. A contractor mortgage broker can identify the best lender based on your financial profile and your business priorities.
