Less than 12 months contracting history - mortgage

[northernladuk]

Thank you. I suppose this is what I was afraid to hear.

Really started doubting about the whole mortgage idea now. Maybe it makes sense to wait until I at least file my 1st year contracting accounts before trying again

I'd say it so worth doing a little more digging before dropping it. Find out why the rate is what it is and how that compares to other lenders you haven't quite got access to. Is it your LTV rather than anything to do with contracting etc.

Find out exactly what the problem is. If it is your LTV and you come back with the same value after two years you could have a bit of a shock that nothings changed and you've wasted a year etc. Get a plan together to get where you want as soon as possible.

[FrontEnder]

Thank you. I suppose this is what I was afraid to hear.

Really started doubting about the whole mortgage idea now. Maybe it makes sense to wait until I at least file my 1st year contracting accounts before trying again

The only way to find out is to apply. Go for the agreement in principle and find out what they'll lend you and what deposit you'll need. If you're not happy with that, then go to another broker and see what they say.

Ultimately, you may pay a bit more as you are viewed as higher risk, so the product range you can get won't be as broad. But if paying a bit more means you get the house you want at today's prices, then it may well be worth it.

While house price rises may slow down after Brexit, no one is predicting that they will fall, so buying a house next year will probably be still more expensive than last year. Paying 1% more for a couple of years is probably better than paying 10-20k (for example) more in 2 years.

[FrontEnder]

You also have to bear in mind each lender has their own criteria. Some will want you to be less than 50% through the contract, another won't accept anyone with gaps over a certain length in the last few years etc. Even if the numbers match and you have more than 15% deposit other criteria can come in from left field and trip you up.

Oh yes, I'm not suggesting my experience is what the OP should expect. They also look at your credit report, mine is pretty good, but not perfect, so maybe that swayed them to ask for a higher deposit.

I'm a little surprised by this. I remember when I was searching first time I went to a number of high street lenders and when I mentioned the less thank 1 year they said no problems, they'll just top up the 2 years with the information from perm employment. They seemed pretty clued up with the fact they'd need to speak to my accountant and the like. I just found I was spending an inordinate amount of time searching so went to Freelance Financials that did all that for me.

I'm a little surprised by the comment regarding traditional mortgage lenders using company accounts. I thought most would be happy to speak to you about your income but the number of lenders actually going on contract rate or company accounts was still pretty low. It's not your money after all so is a big risk.

Maybe things have changed in the last couple of years since I got my first contractor mortgage.

I've no idea how common it is, but if you're the sole owner of a company, they can look at your accounts. There's basically a few ways you can apply:

-As an employee, so mainly on your salary (obviously not good for limited co contractors)
-As self employed/business owner director (they'll probably want as much info as possible, inc Ltd co. accounts)
-As a contractor based on daily rate/current contract.

Each lender is different, but the longer you're a contractor, the more options you have. Maybe some lenders will be happy to take your dividends as fixed income, some others might view this as variable income and therefore give it less weighting in their decision. This is why it's probably better to go with a specialist contractor broker, at least for the first time.

[tractor123]

I'd say it so worth doing a little more digging before dropping it. Find out why the rate is what it is and how that compares to other lenders you haven't quite got access to. Is it your LTV rather than anything to do with contracting etc.

Find out exactly what the problem is. If it is your LTV and you come back with the same value after two years you could have a bit of a shock that nothings changed and you've wasted a year etc. Get a plan together to get where you want as soon as possible.

Thanks. To be honest my current deposit is just over 10% which is not much. I am just in process of doing my research online. Will also speak to another broker just to see if he/she will say the same thing.

[tractor123]

The only way to find out is to apply. Go for the agreement in principle and find out what they'll lend you and what deposit you'll need. If you're not happy with that, then go to another broker and see what they say.

Ultimately, you may pay a bit more as you are viewed as higher risk, so the product range you can get won't be as broad. But if paying a bit more means you get the house you want at today's prices, then it may well be worth it.

While house price rises may slow down after Brexit, no one is predicting that they will fall, so buying a house next year will probably be still more expensive than last year. Paying 1% more for a couple of years is probably better than paying 10-20k (for example) more in 2 years.

Thanks, I'll try to get AIP this week.
With house prices going up, I thought it would make sense to buy sooner rather than later, but obviously I am not the most desirable mortgage customer at this point.

[Mincepie]

speak to a couple of contractor brokers already mentioned and you may well be pleasantly surprised

[tractor123]

speak to a couple of contractor brokers already mentioned and you may well be pleasantly surprised

Thanks! Will do

[Kraut]

Also, you don't have to wait until your first return to get accounts done. You can ask your accountant any time to prepare them up to the current date and add a nice cover letter. It helps immensely to have an accountant confirm your most recent figures, for anything remotely related to borrowing.

[northernladuk]

Also, you don't have to wait until your first return to get accounts done. You can ask your accountant any time to prepare them up to the current date and add a nice cover letter. It helps immensely to have an accountant confirm your most recent figures, for anything remotely related to borrowing.

Just check with your accountant first. Some of them may charge you for wanting them early.

[kaiser78]

Do you know if they accept less than 12 months accounts? Should I go directly to them or via broker?

I used one of the brokers from this website and she says my only option is Halifax as I have been contracting for less than a year.

I'd like to have a choice and ability to compare at least two mortgages before signing up with anyone

I went directly to them and they were very accommodating, although this was 5-6 years ago now...