MMR - Getting a mortgage whilst on the bench?

[Mark McBurney@CMME]

No didn't speak to you.

Also my contracts tend to be 1-3 months then extended. I rarely have a contract which has 6-12 months on it.

Hi SueEllen,

I wasn't referring to your mortgage, or Halifax for you specifically, it was just an example.

[Tightfit]

Yes we know of each other

I am interviewing today. I hope I will get a lot more this week. I started pushing the job boards last week. With some luck I hope to secure something aqap.

In theory a limited company would need 3 years of accounts, but like you said, they still will need a current contract. It makes me think that beginning contracting is not good for somebody if they are planning to request a mortgage within a year or two, especially since the new MMR rules went into effect in April 2014. It does not matter whether they are LTD or Umbrella with this opinion ... Obviously longer contracts are better, 6 months is better than 3 months, but as others have said, contractors are a temporary resource, which I have always known, and sometimes the client's projects and budgets do not work out for the duration. In conclusion, the planets have to line up for contractors at the time of applying for mortgage ... how great and how divine!

I don't think there's any high street lender in the UK ( Bank or
Building Society ) that would consider Contractors for a mortgage - especially since the new MMR review & affordability tests came into place this year.

Lenders couldn't give a toss about how long you've been contracting whether as PAYE, Umbrella or Ltd Company. As they all lump Temps, Contractors and the Self Employed together as 'Risk' and in their eye's your all 'a Big Risk' and will be quickly shown the door ( irrespective of whether your in work or not ) - if you apply for a mortgage at any high street bank or
building society.
The only other option most frequently used - is to use a Mortgage
Broker - as they are 'in the know' as to which Lenders are
amenable to Contractors but since MMR was introduced the
number of amenable lenders has fallen dramatically.

Solution:

Although it irks against Contractor ethics, I'd get a Permanent job before house hunting and applying for a mortgage - you
only have to pass the Probationary Period in 6 months as opposed to 2 or 3 years ( steady contract renewals ) with the
same client, to secure your mortgage approval in principle.

Once youve secured the mortgage - nobody's forcing you to
remain in the Permanent job forever, so your always free to return
to contracting afterwards, if you so desire.

[Power Mortgages Ltd]

I don't think there's any high street lender in the UK ( Bank or
Building Society ) that would consider Contractors for a mortgage - especially since the new MMR review & affordability tests came into place this year.

Lenders couldn't give a toss about how long you've been contracting whether as PAYE, Umbrella or Ltd Company. As they all lump Temps, Contractors and the Self Employed together as 'Risk' and in their eye's your all 'a Big Risk' and will be quickly shown the door ( irrespective of whether your in work or not ) - if you apply for a mortgage at any high street bank or
building society.
The only other option most frequently used - is to use a Mortgage
Broker - as they are 'in the know' as to which Lenders are
amenable to Contractors but since MMR was introduced the
number of amenable lenders has fallen dramatically.

Solution:

Although it irks against Contractor ethics, I'd get a Permanent job before house hunting and applying for a mortgage - you
only have to pass the Probationary Period in 6 months as opposed to 2 or 3 years ( steady contract renewals ) with the
same client, to secure your mortgage approval in principle.

Once youve secured the mortgage - nobody's forcing you to
remain in the Permanent job forever, so your always free to return
to contracting afterwards, if you so desire.

Sorry Tightfit but I am going to have to completely disagree with most of what you have said there.

Your first point about there being no High Street lenders who will consider contractors in the UK is not right. Halifax are a high street lender, the biggest in fact and they are contractor friendly.

Contractors don't have to go and get a permanent job in order to get a mortgage either. They can and do secure mortgage funding either based upon a multiple of their contract rate annualised or via their Limited Company accounts.

The number of contractor friendly lenders since MMR has been introduced hasn't fallen dramatically, it has actually increased!

Lenders do care about how long you have been contracting with two of the contractor friendly lenders needing you to contract for 2 years in order to really consider you (although one of those is Clydesdale Bank who are very flexible with that particular point).

Just because you are self employed or contracting does not mean you will be shown the door by all high street mortgage lenders at all. I am not sure where you are plucking your information from but that simply isn't the case at all. Lenders need to ensure they can prove affordability. For a lot of lenders they will assess a contractor who uses their own Limited Company as self employed. Essentially they will assess that contractor as a business and will wish to see over a period of 2-3 years normally, how much in salary and dividends that Limited Company Director has taken. If they are unable to prove sufficient income using salary and dividends there are a few (high street) lenders who will look at net profit of the Limited Company (some before the deduction of corporation tax, others after tax) plus your salary. If the income is still not sufficient to support the level of borrowing required or quite simply the contractor does not have the 2-3 years of accounts they can look to secure funding based upon a multiple of the contract rate (again from high street lenders).

Even the point about getting a permanent job you made was somewhat incorrect. With most high street lenders, you do not have to wait to pass a probationary period anyway!

[SarahL2012]

I got a mortgage with hsbc earlier this year when out of contract - but I had 3 years of accounts. They didn't even ask whether I was in contract at the time, just wanted to see salary & dividend details.

But they did ask for a lot of budgeting work to prove the payments were affordable.

[Mark McBurney@CMME]

I got a mortgage with hsbc earlier this year when out of contract - but I had 3 years of accounts. They didn't even ask whether I was in contract at the time, just wanted to see salary & dividend details.

But they did ask for a lot of budgeting work to prove the payments were affordable.

They didn't ask about contract as they have assessed you as self-employed based on the three years' of accounts. This is probably the only way of being able to obtain a mortgage as a contractor whilst out of contract.

[rocktronAMP]

They didn't ask about contract as they have assessed you as self-employed based on the three years' of accounts. This is probably the only way of being able to obtain a mortgage as a contractor whilst out of contract.

Hi Mark

I believe today that I will get an offer of 6 months for contract in central London at good rate.

I have just been on the phone yet again and I 0was told categorically that it is very unlikely that I will be able to apply for a mortgage, because I use a umbrella company and because I have a gap "on the bench" between contracts of 2 months (assuming that the agent and the client are honourable.)

"Before I can apply for a mortgage as a contractor, I need to be have continuously working for 12 months in my next contract positions."

Right now I am

Is there any contractor mortgage specialist that can help me now? Any pointers at all??

[NickNick]

How long does it take for a contractor to actually get a mortgage in 2014?

Assuming, I won a contract [ and I still interviewing now and looking], what are the steps and the time periods inside an application? (What has changed since the early noughties? ;-)

When do you get the mortgage in principle bit?


TIA

I got a mortgage earlier this year and I think once all the paperwork was in it took about 6 weeks.

[anonymouse]

I'm trying with Contractor Financials

Hi Mark

I believe today that I will get an offer of 6 months for contract in central London at good rate.

I have just been on the phone yet again and I 0was told categorically that it is very unlikely that I will be able to apply for a mortgage, because I use a umbrella company and because I have a gap "on the bench" between contracts of 2 months (assuming that the agent and the client are honourable.)

"Before I can apply for a mortgage as a contractor, I need to be have continuously working for 12 months in my next contract positions."

Right now I am

Is there any contractor mortgage specialist that can help me now? Any pointers at all??

There's a gap 9 months ago, for 6 months. But the current contract has been extended, and there's another 6 months to be added yet. They are trying to see what they can do for me.

[Mark McBurney@CMME]

Hi Mark

I believe today that I will get an offer of 6 months for contract in central London at good rate.

I have just been on the phone yet again and I 0was told categorically that it is very unlikely that I will be able to apply for a mortgage, because I use a umbrella company and because I have a gap "on the bench" between contracts of 2 months (assuming that the agent and the client are honourable.)

"Before I can apply for a mortgage as a contractor, I need to be have continuously working for 12 months in my next contract positions."

Right now I am

Is there any contractor mortgage specialist that can help me now? Any pointers at all??

Unfortunately the two areas of concern here are firstly working through an 'offshore' structure, and secondly the gap of several months up to now.

Until recently there was pretty much a choice of one lender for this, who would automatically say no with a gap of more than 5 weeks in the last 12 months, however there is another lending option available to us - unfortunately however they only lend in the South East.

Who did you speak to, out of interest, as I was in a meeting all morning?

EDIT: An 'offer' of contract? Until you're physically working on the assignment and have a fully signed and sealed contract, there are certainly no options, based upon working through an umbrella company.

[rocktronAMP]

Unfortunately the two areas of concern here are firstly working through an 'offshore' structure, and secondly the gap of several months up to now.

Until recently there was pretty much a choice of one lender for this, who would automatically say no with a gap of more than 5 weeks in the last 12 months, however there is another lending option available to us - unfortunately however they only lend in the South East.

Who did you speak to, out of interest, as I was in a meeting all morning?

EDIT: An 'offer' of contract? Until you're physically working on the assignment and have a fully signed and sealed contract, there are certainly no options, based upon working through an umbrella company.

I accepted the offer of a 6 month contract, yesterday. The legal contract between my umbrella company, the recruitment agency and the client is currently being drawn up today.

I currently live in the South East.

I spoke to Simon yesterday morning on the phone after I got and accepted the job offer.