Contractor mortgages - mix of inside and outside contracts

[CS Contracting]

Hi All,

I’m relatively new to contracting, 2-3 months in. I took an outside role with a set project spec, which is coming to an end shortly. The department my project was with has recently had some leavers and after I deliver this project, they’ve asked if I’d be willing to extend and help them cover more of the day to day ops - which would definitely bring the role inside, so terminating my outside contract and extending inside.

Ideally I’d prefer to stay outside, either with a new project spec for this company (and not get involved in their day to day ops) or look for a new role.

I’ve given them a slightly inflated inside rate and if they’re happy with that - then it wouldn’t make sense for me to turn it down.

Anyway — onto my question, would having a mix of inside and outside contracts in the previous 2 years (when I get to that point) affect a mortgage application?

I intend to speak to a specialised broker, but as it’s ~20 months away until I’d have 2 years “books” I thought I’d ask here for general advice first (ie should I avoid mixing outside & inside roles for mortgage application purposes?)

Thanks again all

[saptastic]

Good question - but i would have thought maybe outside/inside irrelevant if the lender just looks at the accounts or check that you have contracts in place (or historically). They wont understand outside/inside so will just look at 'income' levels / Ltd Co accounts/contracts. That is my assumption anyway.

[jamesbrown]

https://www.contractoruk.com/ir35/do...lications.html

Speak to Freelancer Financials.

That said, while IR35 status may not be relevant, your overall contracting history is relevant (e.g., many short contracts) and some lenders won't deal with umbrella companies.

[CS Contracting]

https://www.contractoruk.com/ir35/do...lications.html

Speak to Freelancer Financials.

That said, while IR35 status may not be relevant, your overall contracting history is relevant (e.g., many short contracts) and some lenders won't deal with umbrella companies.

Thanks, I’ll reach out to Freelancer Financials.

Interesting - that article you linked related it to gross PAYEE, which would obviously be far higher inside than outside? With that logic, your lending power multiple would be higher with inside vs outside as they take gross pay/salary into account (without accounting for the taxes/deductibles)

[jamesbrown]

Thanks, I’ll reach out to Freelancer Financials.

Interesting - that article you linked related it to gross PAYEE, which would obviously be far higher inside than outside? With that logic, your lending power multiple would be higher with inside vs outside as they take gross pay/salary into account (without accounting for the taxes/deductibles)

They do that anyway. There are a number of ways for contractors to get mortgages, other than the traditional self-employed/SA302 route, including day rate and profit. In all cases, the multiples are based on gross income, not income after tax, just as they are when a permie gets a mortgage - that is what the article is pointing out. Obviously, affordability is also dependent upon outgoings, but those are factored separately and the income multiple is calibrated accordingly.

[northernladuk]

What Jamesbrown said. Freelancer will just ask for your SA302 to look at the historical money situation. They'll then need to know what your situation is as each lender has different criteria. Some need X months left of the gig, some need you to be in it for x months already, some won't accept x number of gaps and so on.

Give them a buzz, they'll send you a factsheet to fill in and then they'll go check which lenders suits your situation. I believe they'll still lend on your day rate even if you are inside but check with them.

[WTFH]

...and try to save as much for a deposit as possible - the bigger the deposit, the easier it will be to get a mortgage. 60% LTV will have more options and better rates than 95%

[CS Contracting]

Thanks all, I spoke to Freelancer Financials - really knowledgable. Turns out getting a mortgage whilst contracting is relatively easy compared to the advice I was hearing from my parents before making the move!

I’ll definitely be using their services when ready - the £599 fee seems reasonable too.

[TheDude]

As you have documented past evidence of income you should be fine.

I know a mortgage broker and the bane of his life are 'cash rich' Essex tradesmen/wideboys who have modest incomes on paper but typically respond with an amazed 'do you know how much I earn?' when told they have no chance of borrowing the amount they desire.

[BlasterBates]

I wouldn't exaggerate your income, normally they check against your bank statements. Put whatever income you can demonstrate from those.