Engagment options effect on mortgage elligibility

[Lance]

You did well to get an AIP for that much. 450K on 80K combined works out at 5.6x multiple which is pretty darn high!

Did you go direct to the lender or via a broker?

Regarding buy while retaining I presume you'd need to look at renting your old place on as a BTL unless you arent anywhere near you borrowing limits.

Have a call booked for CFM early next week, hopefully they can paint a clearer picture for me.

like I said. They weren't interested in anything other than ability to pay.
It was my current provider.
And no interest in letting. The purpose of buying before selling is simply because the market is a tulipshow if you're in a chain. Basically many vendors won't even let you view unless you've sold.

[MrC]

yeah. But when I had the conversation they knew I was a contractor, they just weren't that interested. They wanted to know if my personal income was going to drop. Which it isn't as I have a decent war chest, but they didn't give a hoot.
AIP of just shy of £450k based on my income of £50k and wife's income of £30k. And the fact that we have no debts (no car loan, lease etc.).

A mortgage that large over 15 years would be £3k a month. Which is a HUGE chunk of income, and not something I want to touch.

You did well to get an AIP for that much. 450K on 80K combined works out at 5.6x multiple which is pretty darn high!

Did you go direct to the lender or via a broker?

Regarding buy while retaining I presume you'd need to look at renting your old place on as a BTL unless you arent anywhere near you borrowing limits.

Have a call booked for CFM early next week, hopefully they can paint a clearer picture for me.

[Lance]

You could argue there's a difference of intention and how easily an employer can bin you off. Permanent= employment rights = it's hard to get rid of people!

Yes obviously the answer to that one is a resounding no. Always seems bizarre though that they would ask that when you have at best maybe 6 months left on your contract and you are talking about annual earnings not changing. Especially when the mortgage term is 20 odd years

yeah. But when I had the conversation they knew I was a contractor, they just weren't that interested. They wanted to know if my personal income was going to drop. Which it isn't as I have a decent war chest, but they didn't give a hoot.
AIP of just shy of £450k based on my income of £50k and wife's income of £30k. And the fact that we have no debts (no car loan, lease etc.).

A mortgage that large over 15 years would be £3k a month. Which is a HUGE chunk of income, and not something I want to touch.

[MrC]

Umbrella has a very day rate recorded against it that Banks can use in ways that a FTC salary can't be (don't ask for the logic behind it but there does seem to be a set of rules that still exist that results in far higher multiples being available if you go via a broker).

Yes, this seems to affirm my take away from the broker conversations that it's all smoke and mirrors and hence difficult to set yourself up to maximise your elligibility since you dont really know what the criteria are.

[MrC]

umbrella or FTC is the same as a job.
Why would it not be?
They might ask if you can think of any reason that circumstances will change in the xxx future. The answer to that is 'no'

You could argue there's a difference of intention and how easily an employer can bin you off. Permanent= employment rights = it's hard to get rid of people!

Yes obviously the answer to that one is a resounding no. Always seems bizarre though that they would ask that when you have at best maybe 6 months left on your contract and you are talking about annual earnings not changing. Especially when the mortgage term is 20 odd years

[Lance]

Umbrella has a very day rate recorded against it that Banks can use in ways that a FTC salary can't be (don't ask for the logic behind it but there does seem to be a set of rules that still exist that results in far higher multiples being available if you go via a broker).

I've just had an AIP (this is last week so very current). There were no multipliers, and no interest in me being a contractor.
They did the affordability tests and as a company owner they wanted 2 years of SATR.
I suppose you might be interested in other methods if you want to borrow more than the affordability check says you can. But I'd call that madness.
I'm more than happy to get a mortgage based on £50k salary and if I want a bigger/more expensive house I just take more cash out the company as a deposit.

I have engaged an IFA since then but that's more because we might need to buy before we sell, so that gets more complex as my affordability tests fail when I have two mortgages.

[eek]

umbrella or FTC is the same as a job.
Why would it not be?
They might ask if you can think of any reason that circumstances will change in the xxx future. The answer to that is 'no'

Umbrella has a very day rate recorded against it that Banks can use in ways that a FTC salary can't be (don't ask for the logic behind it but there does seem to be a set of rules that still exist that results in far higher multiples being available if you go via a broker).

[Lance]

I've actually already spoken to 2 brokers...

Neither of them seemed to be able to give a difinitive, it was something of an it depends. I get the impression they don't see too many FTC PAYE as didn't seem too clued up.

Also they both talked about getting a mortgage based on a "day rate" which I always used to think represented the higher risk /more exotic and therefore more expensive products.

hence keen to get contractors views...

umbrella or FTC is the same as a job.
Why would it not be?
They might ask if you can think of any reason that circumstances will change in the xxx future. The answer to that is 'no'

[northernladuk]

How will contractors views help? We aren't there yet and know next to **** all about mortagages.

Try speaking to John Yerou at Freelancer Financials. He was pretty upbeat last time this nearly hit as he had it on good authority that lenders would still continue to lend of the day rate regardless of engagement. I can only assume that's because the process only looked at rate and didn't ask any more questions because being inside makes the affordability of a contract rate offer a problem.

See if he's had an update.

[MrC]

I've actually already spoken to 2 brokers...

Neither of them seemed to be able to give a difinitive, it was something of an it depends. I get the impression they don't see too many FTC PAYE as didn't seem too clued up.

Also they both talked about getting a mortgage based on a "day rate" which I always used to think represented the higher risk /more exotic and therefore more expensive products.

hence keen to get contractors views...

[eek]

Phone up a mortgage broker and ask them
https://cfmortgages.co.uk/contracting-works/

[MrC]

So i've been offered work ("inside", fixed term contract on a day rate) and have a choice of 3 engagment options for this work as follows:

1. PAYE via agency (includes holiday pay on top)
2. Umbrella from approved list (with higher rate than 1.)
3. Ltd Co (with higher rate than 1.)

I'm fully aware that there are lots of pros and cons to the 3 options but I want to focus soley the mortgage choice and cost that I might have in approx 6 months time with each of the options.


All of the options would be starting from now (so I wouldn't have x years of accounts for example with 3.)

I see major general downsides to 3. so doubt that makes much sense. It really comes down to merits of options 1 and 2 for choice of mortgage options.

I have heard that umbrellas are better because even if i had multiple clients I would have had continous emplyment.
I'm mindful that umbrellas "commission" could affect the amount that you can borrow.
I've heard that umbrellas represent a permanent job and so get you past the self-emplyment hurdles with the lenders but I've also spoken to a broker who said lenders know who the umbrellas are and still treat you as self employed if you are employed by an umbrella.

Keen to get a contractors view particularly from anyone whos been there, done that recently.