Getting a new Mortgage

[Cloudrider]

Hi All,

I wondered if anyone had pointers or recommendations on Lenders and the do's and don'ts of getting a new mortgage as a contractor please?

I have an existing mortgage but my lender doesn't entertain 'dirty' contractors , and we'd like to think about moving house. I believe its best to stay away from the high street and use a specialist broker. What fees should I expect with a broker?

Thanks all.
Nige

[Jeebo72]

Halifax work with contractors with 3 years accounts. Hsbc will too, but usually base it on your PAYE + Dividends to work out your annual salary. With HSBC, if you go in and chat with the manager, they can be persuaded to go above your “salary” based on invoiced amounts / history. Which is what a broker does. So save some money! Don't pay over the odds because you're a "risk". You're not if you have a long history of contracting. If you are a newby with 1 years accounts, then take what you can get

[jamesbrown]

Halifax work with contractors with 3 years accounts. Hsbc will too, but usually base it on your PAYE + Dividends to work out your annual salary. With HSBC, if you go in and chat with the manager, they can be persuaded to go above your “salary” based on invoiced amounts / history. Which is what a broker does. So save some money! Don't pay over the odds because you're a "risk". You're not if you have a long history of contracting. If you are a newby with 1 years accounts, then take what you can get

I don't agree with this. You're better off going through a broker. There are several good ones around here, and many of them will waive their fees if introduced through CUK. The brokers have a much better overview of all the lenders and what is likely to work for your circumstances, as there are several types of mortgages available for contractors, as well as the traditional self-employed route (based on accounts). Typically, staff in a bank branch won't have a clue about contractors and will attempt to push you into the self-employed route, which may not be appropriate (depending on your borrowing requirements and status). If they mess-up your application, you may not be able to apply again for a while, given the credit checks involved. Stick with a broker. I have personal experience of Freelancer Financials, and would highly recommend them, but there are several others around here with good reviews too (Power Mortgages etc.), so do some searching.

[Mark McBurney@CMME]

Halifax work with contractors with 3 years accounts. Hsbc will too, but usually base it on your PAYE + Dividends to work out your annual salary. With HSBC, if you go in and chat with the manager, they can be persuaded to go above your “salary” based on invoiced amounts / history. Which is what a broker does. So save some money! Don't pay over the odds because you're a "risk". You're not if you have a long history of contracting. If you are a newby with 1 years accounts, then take what you can get

Sorry, I have to disagree with the majority of this.

Firstly, Halifax are one of the most contractor friendly lenders out there, so to suggest that someone should approach them with Limited Company accounts in hand is plain wrong, and could well lead to lending restrictions due to being assessed as self-employed rather than as a contractor.

Secondly, your idea of what a broker does is a little off. We do far more than simply 'persuade lenders to go above your salary', this very rarely happens (almost never, with Halifax, in fact), and we even have access to brokers that you can't access by going direct.

As 'jamesbrown' says, there are several contractor-specific brokers who all do a very, very good job - the names mentioned by him are well known and respected on this forum based on the service that has been provided, and I can assure you that this goes beyond bending the arm of an underwriter.

That said, if you can go direct then invariably you will save money (fees can be anywhere from £500 to £1500 in my experience, it isn't always a good idea to choose the cheapest, neither is there a guarantee that the most expensive is the best...) by not paying a broker however there are two things to consider here. Firstly, if you call up Halifax tomorrow, you'll get through to their call centre which almost never deals with contractors. Do you trust that they actually know their own company's lending policy to contractors? Many of my clients have had the opposite experience. Secondly, your application is in, you think it's going smoothly, and then you get repeated requests for the same documentation, which you've already provided. Other than lose your temper and tell them they already have it, what do you do? Brokers have entirely different access routes and with the addition of BDM's can solve many minor issues before you even hear about it, with no delay.

I fully understand the temptation to save money and not use a broker, but I can tell you from personal experience with clients that that approach is very risky.

Whatever you choose to do, OP, good luck.

[TestMangler]

I completely understand that everyone's experiences and opinions will be different, but I got my last two mortgages direct with Nationwide. The in branch consultant completely understood the 'company director' thing and had no problems whatsoever. All that was needed was an accountants statement. LTD has been going since 1994 though so maybe that made it a bit easier.

[Mark McBurney@CMME]

I completely understand that everyone's experiences and opinions will be different, but I got my last two mortgages direct with Nationwide. The in branch consultant completely understood the 'company director' thing and had no problems whatsoever. All that was needed was an accountants statement. LTD has been going since 1994 though so maybe that made it a bit easier.

The 'company director' thing with accounts for 20 yrs is assessing you as self-employed based on salary/dividends, not on contract value.

As I said, if that fits, then you will undoubtedly have many more options that lending based on your contract value alone, however what you've described is a mortgage assessed on self-employed income rather than a contractor-specific assessment.

[Power Mortgages Ltd]

Halifax work with contractors with 3 years accounts. Hsbc will too, but usually base it on your PAYE + Dividends to work out your annual salary. With HSBC, if you go in and chat with the manager, they can be persuaded to go above your “salary” based on invoiced amounts / history. Which is what a broker does. So save some money! Don't pay over the odds because you're a "risk". You're not if you have a long history of contracting. If you are a newby with 1 years accounts, then take what you can get

Sorry, Jeebo but you're wrong as has already been pointed out.

HSBC are one of the most difficult lenders to pursuade to come away from their typical criteria and I know this, not through dealing with them as an introducer, as they are a 'direct only' lender at the moment so they do not accept applications from brokers but much rather through dealing with them for my own mortgage application.

HSBC need a minimum of 3 years Ltd Co accounts and are highly unlikely to consider anyone with less than 3 years accounts. They will only assess your income through salary and dividends too and we all know that if you have a particularly efficient Accountant or if you have had gaps for whatever reason (including time in a permy role), your salary and dividends may not support the level of borrowing you seek so to suggest you can go in and chat to your bank manager who will disregard their criteria is misleading and not the case in a lot of scenarios.

I appreciate there may be one off cases with mitigating circumstances such as you personally bank with HSBC as a Premier customer, you have your business bank account with them, you are looking for a low loan amount in respects to the value of the property and what you're asking for isn't too far off what they will do on their standard criteria, in which case they may be a little fleixible but from significant experience of dealing with many contractor's mortgages, this is rarely the case. One of the above isn't normally enough to persuade them to be flexible.

Furthermore with HSBC and this is coming for very recent experience, you are looking at a good 4 or 5 hours on the phone just to get to the application submission stage, which is ridiculous! They are picky to the extreme and over zealous with their processes. Having spent around 5 hours myself dealing with this, I now have to go into a branch anyway to get my ID certified which will take another hour of my time (including travel time) as a round trip and about another hour or so gathering all the documents they need (bank statements and income verification documents). I can then post the application off which gets sent to an Underwriter. The Underwriter will no doubt need to ask me more questions which could take up more of my time. It's fair to say that this process will take up around a day of my time.

How much is the average contractor day rate? Would it not be better to deal with a broker who can not only search through the whole of the market for you to ensure that you are not only getting the best rate for your circumstances but can also limit your chances of applying for mortgages you simply wouldn't be eligible for and on top of that do all the leg work for you rather than you using your own valuable time to do this? in a lot of instances, if using a broker saves you 1 working day, your day rate will cover the broker fee anyway and it will not only save you time but hassle and stress too. Dealing with Underwriters and lender's advisors can be very frustrating, especially if they do not seem to understand your circumstances as a contractor. We deal with this day in and day out so are a little more well versed in knowing what to do/say to progress the matter.

I think you are also mistaking contractor criteria with self employed criteria. If you have 2 or 3+ years of Limited Company accounts and the income through those accounts (predominantly salary and dividends but sometimes your share of net profits plus salary) is sufficient to support the level of borrowing you require then it doesn't matter if you are a contractor or if you run a shop selling second hand shoes! The lender will assess you as a Company Director and on the strength of the accounts. Contractor criteria applies if you are not able to prove your income through the accounts or the income you can prove (for a number of reasons) is not sufficient and you then have to rely upon using your contract rate annualised to prove your income.

It sounds like you may have been lucky enough in the past to secure a mortgage based upon your accounts through HSBC and good on you for that. As Mark has said, if you are able to secure a mortgage directly because you can prove your income in the conventional manner and you do not feel a broker would be of benefit to you for whatever reason then, yes, go direct. But applications for mortgages have changed with the introduction of the Mortgage Market Review (I'm guessing you applied before that happened?) and some people simply do not have the time or confidence to apply themselves not to mention they may not be in the privileged position to be able to prove sufficient income and therefore see benefit in using a broker.

[Sausage Surprise]

I completely understand that everyone's experiences and opinions will be different, but I got my last two mortgages direct with Nationwide. The in branch consultant completely understood the 'company director' thing and had no problems whatsoever. All that was needed was an accountants statement. LTD has been going since 1994 though so maybe that made it a bit easier.

Try explaining income splitting with the wife and the fact that the mortgage is in your name only though.
Quite rightly they don't take "her" divi income into account so that scuppered me with that approach.

[northernladuk]

Hi All,

I wondered if anyone had pointers or recommendations on Lenders and the do's and don'ts of getting a new mortgage as a contractor please?

I have an existing mortgage but my lender doesn't entertain 'dirty' contractors , and we'd like to think about moving house. I believe its best to stay away from the high street and use a specialist broker. What fees should I expect with a broker?

Thanks all.
Nige

You could of course try the search using the options as outlined in the thread below. Am sure you will find answers to all these questions and many you haven't thought of in the many 100's of threads on this exact topic..

Welcome / FAQs

[northernladuk]

I completely understand that everyone's experiences and opinions will be different, but I got my last two mortgages direct with Nationwide. The in branch consultant completely understood the 'company director' thing and had no problems whatsoever. All that was needed was an accountants statement. LTD has been going since 1994 though so maybe that made it a bit easier.

Was this after the tirade of abuse and swearing or around the time you locked your hands around his throat?