Reply to: Direct Mortgages in the era of Umbrellas

[courtg9000]

Having being involved on the fringes of property finance for the self-employed - not specifically contractors I can say that the standard lenders treat the self-employed as high risk. God forbid you walk into a high street branch wanting finance for say a restaurant business with owners residential accomodation over! Most bank branches and front line contact centres are not geared up for the self-employed and enquiries such as this. When I was a proper contractor, I used a specialist contractor outfit. I got a good deal. On my first mortgage they were about 30% cheaper than a quote from my bank! When I was no longer a "proper contractor I went to a different specialist each time knowing that going direct to a mainstream lender was a waste of time. There was no way I had direct access to the deals they had.

My only other tip surrounds non-property investment BTL for example income-generating property (see my para above for a good example). Make sure you have a rough forward business plan before approaching the broker. It will make the process easier.

[northernladuk]

I've also had the complete opposite experience to you. In fact, even when I was a permie, a broker worked out better than going direct on two occasions when I came to a new purchase or remortgage.

Indeed. Very important for BTL's as well. The best BTL for years has been Birmingham Midshires and they ONLY deal with brokers. Could be the same with normal mortgages. You'll only find out if you go speak to a good broker.

It's funny but I wrote brokers of any kind off as soon as the internet took off. Waste of time, extra cog, more expense etc... but in recent years I've gone back to them just for a sniff and I've been pleasantly surprised. I'd always use a mortgage broker without question, I've started using a local travel agents for our holidays (adult only but trying to avoid naturist/risque types) and we used one recently for car insurance (young driver). Was pleasantly surprised to find the mortgages and the car insurance was cheaper than I could find. The holiday one I dunno about prices but took the legwork and worry out of the hols so booked a few through them.

It does appear they've come along way rather than being an added cost so am happy to try them again now. I think this edict of booking direct is cheaper isn't a given nowadays. Either that or I've just got lazy/posh and happy for someone else to do the work.

[edison]

Much claimed on here, but every whizz bang contractor specialist deal I've seen has always been beaten by going direct.

"Ah but we have exclusive rates" they'll say - and they're right. And their finders fees are exclusive too, which usually negate them if they haven't been beaten already by going direct.

I've also had the complete opposite experience to you. In fact, even when I was a permie, a broker worked out better than going direct on two occasions when I came to a new purchase or remortgage.

[northernladuk]

Much claimed on here, but every whizz bang contractor specialist deal I've seen has always been beaten by going direct.

"Ah but we have exclusive rates" they'll say - and they're right. And their finders fees are exclusive too, which usually negate them if they haven't been beaten already by going direct.

Remember also only a handful of lenders will deal with contractors. I've no idea how that works with people with contracting/brolly mix but I can't imagine it helps. Most of the normal deals could be unavailable to us and we have to go with specialist products. These aren't on comparison sites and the criteria for each is different, contract breaks, length of contract etc. It's OK say go direct but you've got to put the legwork in trying to find which lenders off a solution that suits your situation and when you've got that list you can start looking at comparisons. That's a lot of work. A broker can do this where it's arguable you can't.

[eek]

The only answer is "It depends".

Speak to brokers and speak direct and then work out what is the best deal you are likely to get.

[northernladuk]

Much claimed on here, but every whizz bang contractor specialist deal I've seen has always been beaten by going direct.

"Ah but we have exclusive rates" they'll say - and they're right. And their finders fees are exclusive too, which usually negate them if they haven't been beaten already by going direct.

I'd also say that's wrong. I was very pleased with my product from Halifax which beat most of the high street ones. Was more than happy to pay for them to find it and deal with it.

Instead of putting people off get them to try it and do their own sums rather than putting out arguable untruths that may mean people miss the best deals.

[NowPermOutsideUK]

Much claimed on here, but every whizz bang contractor specialist deal I've seen has always been beaten by going direct.

"Ah but we have exclusive rates" they'll say - and they're right. And their finders fees are exclusive too, which usually negate them if they haven't been beaten already by going direct.

Simply not true - My primary residence is mortgaged with Halifax - 1.08% through a broker - going direct with halifax the rate was 1.29

With btl bmsolutions is the cheapest with 1.34% which can only be done with a broker

I looked at this in detail - the brokers seem to always do better than direct

[Fraidycat]

Basically contractors are considered to be 'sub prime' by most regular lenders

0.5% higher interest on a 500K loan is an extra £2500 per year, or £62500 over 25 years

[PerfectStorm]

Will it? Every deal I can think of they've got me on my home has been less or equivalent to the normal products that weren't available to me anyway so it's actually cost me less.

OP can at least get the options on the table and then make a decision. Costs nothing to get the offer.

Much claimed on here, but every whizz bang contractor specialist deal I've seen has always been beaten by going direct.

"Ah but we have exclusive rates" they'll say - and they're right. And their finders fees are exclusive too, which usually negate them if they haven't been beaten already by going direct.

[Lance]

The decision in principal did not require it, but the full application asks whether you are on a fixed term contract.
The umbrella payslip shows the day rate and calculation which I expect would reveal the truth

An inside IR35 contract through a brolly is not an FTC.

[eek]

Contractors are non standard applications - why would you not at least look at the specialist providers who know what is required to get a contractor a mortgage and find out from them exactly what rates they can get you.

And given current mortgage rates unless you are borrowing a £1m or so I really don't think the diference in interest payments will be that much, as surely you would be remortgaging when the existing mortgage runs out.

[northernladuk]

Will cost ~£45K more in interest.

Will it? Every deal I can think of they've got me on my home has been less or equivalent to the normal products that weren't available to me anyway so it's actually cost me less.

OP can at least get the options on the table and then make a decision. Costs nothing to get the offer.

[crack_ho]

Why tell them you're a contractor?

The decision in principal did not require it, but the full application asks whether you are on a fixed term contract.
The umbrella payslip shows the day rate and calculation which I expect would reveal the truth.

I'd still recommend going through a broker

Will cost ~£45K more in interest.

[northernladuk]

We've had one post on here recently with someone struggling to get a normal mortgage via a brolly but I think the complication there was he hasn't been employed by them for the period they look back so it got complicated and lenders don't tend to do complicated when it comes to standard products.

I'd still recommend going through a broker. I've been using Freelancer Financials for many years for my BTL and home mortgages. Have a chat to John Yerou. He was saying when the PS hit that you could still get a mortgage based on your rate even if you were via an Umbrella. That's kinda good and not good. Good because the fact you are via brolly doesn't limit your borrowing levels but bad because I am sure there will be an issue with affordability if the mortgage is based on a rate you loose 50% of. I also believe times have changed so this may not be the case.
You'd think with so many people going brolly a couple of the lenders have wised up to it and have a better process.

Anyway, give Freelancer Financials a call and see what they have to say.

[Lance]

Anyone recently applied directly for a Mortgage in the new Umbrella era?

I'm looking at a product/rate that is not available via a broker but the criteria is a bit vague...

Why tell them you're a contractor? They'll want to see 3 months of payslips and you'll appear as an employee (cos that's what you are) of the umbrella.
They will ask if you can foresee any reason why your income might change in the future, and you can be truthful and say no as you'd get another job if you finished this one.