Mortgage before taking a permanent role

[Trinks]

Hi,

I am currently contractor within the same company since almost 2 years 1/2 and my current contract should ends on June 2020.
Then, I may consider for a permanent role.

My current rate is £620/day.
For a permanent role, I think that I can expect £90k/year.

According to mortgage calculators, it seems that I could borrow :
- About £620k - £670k from my current rate.
- About £450k if I become permanent.

£450k would be too short to have kind of properties I aim.
That's why I am considering applying for a mortgage before eventually applying for a permanent role.
I am confident to be able to afford the mortgage even after changing for a permanent role.

I have few questions about it :
- What is the typical property purchase process timing?
- When does the lender checks for your contract and decides how much you can borrow?
- What about if the buying process take months and I become permanent before the house purchase occurs?

Any advices?

Thanks

[craigy1874]

Hi,

I am currently contractor within the same company since almost 2 years 1/2 and my current contract should ends on June 2020.
Then, I may consider for a permanent role.

My current rate is £620/day.
For a permanent role, I think that I can expect £90k/year.

According to mortgage calculators, it seems that I could borrow :
- About £620k - £670k from my current rate.
- About £450k if I become permanent.

£450k would be too short to have kind of properties I aim.
That's why I am considering applying for a mortgage before eventually applying for a permanent role.
I am confident to be able to afford the mortgage even after changing for a permanent role.

I have few questions about it :
- What is the typical property purchase process timing?
- When does the lender checks for your contract and decides how much you can borrow?
- What about if the buying process take months and I become permanent before the house purchase occurs?

Any advices?

Thanks

Surely you should only borrow what you can afford under your new salary?

Also, how will you answer the question 'do you expect any changes to your income in the near future?'

[sal]

You have to inform the lender about your change of circumstance in any case.

By applying for a mortgage, do you mean buying the property or just getting the mortgage offer for a property?

If you buy the property then go perm or your income otherwise reduces, you won't be able to re-mortgage to a different lender and your only option will be online retention products from your existing lender.

If you just get a mortgage application and then change jobs before completion, the Lender will just withdraw the offer once you inform them of your change of circumstance. If you fail to inform them, that's a mortgage fraud which is a criminal offence.

[pr1]

If you fail to inform them, that's a mortgage fraud which is a criminal offence.

What is the usual punishment for this? (assuming you never miss a mortgage payment)

[northernladuk]

Getting a higher mortgage on the contractor rate is all well and good but what about affordability when you go perm?

[GordonHunterSuperContract]

Hi,

I am currently contractor within the same company since almost 2 years 1/2 and my current contract should ends on June 2020.
Then, I may consider for a permanent role.

My current rate is £620/day.
For a permanent role, I think that I can expect £90k/year.

According to mortgage calculators, it seems that I could borrow :
- About £620k - £670k from my current rate.
- About £450k if I become permanent.

£450k would be too short to have kind of properties I aim.
That's why I am considering applying for a mortgage before eventually applying for a permanent role.
I am confident to be able to afford the mortgage even after changing for a permanent role.

I have few questions about it :
- What is the typical property purchase process timing?
- When does the lender checks for your contract and decides how much you can borrow?
- What about if the buying process take months and I become permanent before the house purchase occurs?

Any advices?

Thanks

The first thing to mention is that lender’s calculations vary on all sorts of other factors, such as the deposit level, details of any debts you might have, age, whether you have children, amongst many others, but setting that aside for now, the maximum mortgage you would likely be able to achieve with the £620 per day contract would be over £750k, whereas with the £90k, it would indeed be around £450k.

In terms of the timings then, you can get an agreement in principle whenever you wish, but the thing that matters is the situation at the point of application. You would only fully apply for the mortgage once you have had an offer accepted, and that’s key. If, at the point of application, you had agreed to go permanent, then the mortgage would need to be based upon that. The contract is assessed at the point of full application also.

Timing wise then, from application to full mortgage approval would typically be around 10 days to 2 weeks. Of course, that varies, and there are some lenders who are quicker and some who are slower too.

Your final query is an interesting one - If the purchase had dragged on and was taking a while, then that would be fine generally speaking. The mortgage offer is binding on the lender for 6 months, so as long as the purchase completed within 6 months of the mortgage offer being produced, that should be fine. Were it the case that it took longer than 6 months, then we would struggle as there would need to be a resubmission based on the situation at that point. It is really unusual that it would take so long, so I wouldn’t be too concerned about that.

If you need to know anything else, let me know.

[PCTNN]

For a permanent role, I think that I can expect £90k/year.

So you think you can expect that salary?

Which pretty much means, you have no certainty.

I say base your mortgage on your potential permanent salary and if at the end you stay contracting and taking home more, it's all gravy.

[WTFH]

How much of a deposit can you put down?
What budget have you got for a property?

Have you looked to check the location you’d like to live to see if the budget is realistic?

Is the property location near where you would be taking a permanent job? (Saying that, if you’ve been “contracting” at one client for >2 years, you’re effectively a permie)

[Manic]

The other thing to consider is that you will likely be on a fixed rate or some discounted type deal before moving onto SVR. At the end of that period you will want to remortgage and this might tie you to the current lender under the same terms, ie the same period.

[sal]

Your final query is an interesting one - If the purchase had dragged on and was taking a while, then that would be fine generally speaking. The mortgage offer is binding on the lender for 6 months, so as long as the purchase completed within 6 months of the mortgage offer being produced, that should be fine. Were it the case that it took longer than 6 months, then we would struggle as there would need to be a resubmission based on the situation at that point. It is really unusual that it would take so long, so I wouldn’t be too concerned about that.

If you need to know anything else, let me know.

Please don't spread misinformation that might get OP in trouble, bot financial and legal with long standing implications.

The mortgage offer is only binding as long as there is no change in circumstance. Dropping from £620pd to £90k perm is most definitely such change. At which point they can withdraw the offer, they can even withdraw the offer after exchange leaving you in hot water.

You are bound by the terms of the mortgage application to disclose change in circumstance to the lender, failure to do so is mortgage fraud, which is a criminal offence. At the very least you are in danger of getting a CIFAS markers on your credit file, making you essentially a leper for any type of credit and even simple current account opening.

But don't rely on mine or GordonHunterSuperContract's opinions - go ask a mortgage broker and see what their professional opinion will be.