Halifax won't give mortgage due to IR35 and contract wording

[craig1]

Thanks for the replies guys.

Wish it was that simple ! I'm surprised Freelancer Financials are battling so much with their Halifax rep / broker / underwriter or whoever he is. Making my application an absolute missery. I could be earning £1000 per day and still wouldn't please him just because there is no mention of " working 5 days per week" ! After all, who is their right mind would not work every day of a contract unless for good reason. Its the whole ethic of why we work as contractors ! I find this issue rediculous and laughable and wish this rep from Halifax would get real. " 8 hours a day " should suffice as ample proof., never mind all my books and contract extensions etc etc.

What you say there shows that they have no clue about self-employed work.

I typically aim to take 2-3 months a year off, admittedly I've not achieved that in the last three years due to client timescale pressures but for most of the 2000s I did. It's the profit figure at the end of the year that's relevant, not on individual days. I know two business rescue consultant who work 3-4 months a year maximum but when they do work they get paid huge daily rates, all because of the nature of their work. It's the good and bad of being self-employed that you cannot point to guaranteed money on a daily basis, and even if you had a contract that said you did it has no security at all in many cases.

I know one contractor who just got a mortgage in the last few week with TSB at base rate + 1.04%. I know of others who have had similar deals, admittedly that TSB one is the best I've seen for a contractor in a good while.

[DigitalUser]

Positive recommendation for Ben @ Power Mortgages from me who has been a huge amount of help to me over recent months (we now have a mortgage DIP).

You can get mortgages approved based on your contract and day rate, but lenders are normally looking for a solid contract of a decent length to lend on this basis. However, if you've been in business for a while and have years worth of accounts, there's not normally any need to go down this route...there are lenders who will lend to you based on a combination of salary + dividends *or* company net profit before tax + directors salary. This can be your most recent year or an average of the last few years and they'll typically want your accounts and a letter from your accountant as evidence.

I've just had a mortgage approved via Freelancer Financials, with Halifax provisioning the funds. I wouldn't say there is an issue with the broker as these guys have been nothing but helpful.

[deanosity]

...or lack of ! My contract ( rolling 3 months ) does not state anywhere that I work 5 days a week on xxx site. It does state my rate and 8 hours a day. However, Halifax will not grant me a mortgage simply because my agency refuses to declare ( understandably - IR35 incrimination ) that I work 5 days a week at the same company. I am employed by my own Ltd business as a director and have been in buisness for over 12 years. The broker says this is standard practice and my agency refutes it all.

Anyone had such issues? How do you get past this ?

Hugely appreciated

I had a similar issue with my Halifax application the other week.

My issue was the contract rate was not specified as either being hourly or daily on the extension cover sheet.

So I was asked to send a fax from the company confirming what the rate was hourly.

The mortgage was then approved.

[bodillc]

Thanks. A lot makes sense.
The 2 freelancerfinancials have been very helpful and have tried their best. Hats off to them for trying their best and its appreciated. After all, they are trying to broker a deal for their benefit aswell, so, credit to them nevertheless.

[SarahL2012]

I've just gone through the mortgage approval process. At no point did I tell them I was a "contractor" just that I was self employed and ran my own business. They (HSBC) asked for 3 years of accounts, checked salary & dividends and it was all ok.

I wasn't actually in contract at the time either.

[Jeremiah@RHJAccountants]

Do you have an accountant as many like my self will have a mortgage adviser who specializes in contractors who they can refer this to.

That might be a good start as for some reason the high street banks don't like contractors when it comes to mortgages.

Good luck and hope it can be sorted for you soon

[Power Mortgages Ltd]

I have come across this before with Halifax, it really is down to the individual Underwriter and how picky they are being but this only happens very rarely, it does seem like you have been unlucky.

I have had a few applications accepted where the contract hasn't stated number of days worked but just stated the hours. I have also had situations before whereby Halifax have asked for clarification on number of days worked and a reference letter from the Agent to confirm the contract is based upon x days per week has been provided and it's all been accepted.

It does seem like they are being quite picky on this one though.

There are other lenders who will assess income in the same way though who won't be as picky and as it has been pointed out if you have 2 or more years Limited Company trading accounts then so long as the income is sufficient you can often secure funding based upon this route disregarding the fact you are a contractor and being assessed as a self employed Limited Company Director.

Some lenders will define your income as your salary and dividend as an average over the last 2 years (or they will use the most recent year if that figure is lower than the previous year) but sometimes you may find that if your Accountant has kept your accounts quite tax efficient by retaining profit and keeping your salary and dividends below the higher rate tax threshold then your borrowing capabilities with these lenders may be restricted. It will obviously depend upon how much you wish to borrow.

There are however lenders who will look at the accounts in different ways whereby even if your Accountant has recommended retaining profit for tax efficiency you will not be hindered. There are one or two lenders who will lend on company net profit (mainly after deduction of corporation tax but there is even one who lends on net profit before corporation tax deduction) plus your salary. So long as you are not really pushing the boat out and borrowing the maximum you can possibly borrow based upon how Halifax will calculate your income (day rate x 5 days a week x 48 weeks per annum) then you may find this approach will fit too.

Whilst Halifax are a strong contractor lender and generally in most instances understand contractors, they are not always the greatest when it comes to rates. Contractor based funding should only be sought if the conventional approach is either not possible (you do not have at least 2 years Limited Company accounts for the current Limited Company or the income through the accounts doesn't cover what you need to borrow) or you can happen to get a better rate with a contractor based funding lender.

Did the broker you are using ask you about your Limited Company year end accounts? Did they look through them to check to see if they can use them to source mortgage funding for you on this basis? I have seen it many times where brokers simply recommend a contractor rate mortgage as it is simple whereas looking at accounts could have got the client a better deal.

[tractor]

...

I have come across this before with Halifax, it really is down to the individual Underwriter and how picky they are being but this only happens very rarely, it does seem like you have been unlucky.

I have had a few applications accepted where the contract hasn't stated number of days worked but just stated the hours. I have also had situations before whereby Halifax have asked for clarification on number of days worked and a reference letter from the Agent to confirm the contract is based upon x days per week has been provided and it's all been accepted.

It does seem like they are being quite picky on this one though.

There are other lenders who will assess income in the same way though who won't be as picky and as it has been pointed out if you have 2 or more years Limited Company trading accounts then so long as the income is sufficient you can often secure funding based upon this route disregarding the fact you are a contractor and being assessed as a self employed Limited Company Director.

Some lenders will define your income as your salary and dividend as an average over the last 2 years (or they will use the most recent year if that figure is lower than the previous year) but sometimes you may find that if your Accountant has kept your accounts quite tax efficient by retaining profit and keeping your salary and dividends below the higher rate tax threshold then your borrowing capabilities with these lenders may be restricted. It will obviously depend upon how much you wish to borrow.

There are however lenders who will look at the accounts in different ways whereby even if your Accountant has recommended retaining profit for tax efficiency you will not be hindered. There are one or two lenders who will lend on company net profit (mainly after deduction of corporation tax but there is even one who lends on net profit before corporation tax deduction) plus your salary. So long as you are not really pushing the boat out and borrowing the maximum you can possibly borrow based upon how Halifax will calculate your income (day rate x 5 days a week x 48 weeks per annum) then you may find this approach will fit too.

Whilst Halifax are a strong contractor lender and generally in most instances understand contractors, they are not always the greatest when it comes to rates. Contractor based funding should only be sought if the conventional approach is either not possible (you do not have at least 2 years Limited Company accounts for the current Limited Company or the income through the accounts doesn't cover what you need to borrow) or you can happen to get a better rate with a contractor based funding lender.

Did the broker you are using ask you about your Limited Company year end accounts? Did they look through them to check to see if they can use them to source mortgage funding for you on this basis? I have seen it many times where brokers simply recommend a contractor rate mortgage as it is simple whereas looking at accounts could have got the client a better deal.

A lot of the problems come from using seemingly interchangeable terminology. Although you technically can be, it is rare for someone to be self employed AND a company director within a single business. Banks, mortgage lenders and many other professionals including even, many accountants are often clueless when it comes to corporate structures and many cannot differentiate between employment, self employment, company directorships and pure share ownership.

It seems that there are as many financial 'professionals' would benefit from a lesson or two from the general forum here

I don't mean to get at you of course, I am sure your use of the term above was a mere aberration

[TheCyclingProgrammer]

A lot of the problems come from using seemingly interchangeable terminology. Although you technically can be, it is rare for someone to be self employed AND a company director within a single business. Banks, mortgage lenders and many other professionals including even, many accountants are often clueless when it comes to corporate structures and many cannot differentiate between employment, self employment, company directorships and pure share ownership.

It seems that there are as many financial 'professionals' would benefit from a lesson or two from the general forum here

I don't mean to get at you of course, I am sure your use of the term above was a mere aberration

If your a director of your own business, then many lenders will indeed treat you as "self employed".

[bodillc]

I think Power Mortgages has hit the nail on the head there ! Just hit a fussy underwriter and exactly what I am thinking !
I will know on Monday if this gets approved !

btw . the mortgage application was 50% of what I was entitled to if the "day rate x 5 days a week x 48 weeks per annum" formula is used. I had all my accounts audited by Freelancerfinacials AND by Halifax, so this was no issue at all. The 2 main issues for Halifax was 3 monthly x rolling contract was not long enough and that nowhere in my written contract did it state 5 days a week. It only stated 8 hours a day !!

lets hope and pray !!