Reply to: Mortgage application and bench time

[Mark McBurney@CMME]

So a contractor with bench time would be better off not using a special "contractor mortgage" if their income is sufficient for the amount borrowed?

Correct, provided that whichever figure of salary/dividends/net profit supports the level of borrowing required.

[d000hg]

Hi d000hg,

This is because using accounts is the more traditional 'self-employed' assessment of income, looking at historical income via accounts which is proven by the actual figures, so gaps don't matter - it should only become relevant about down time if you're looking to apply based on contractor-criteria (or sometimes with the few lenders who will look at 1yr accounting history, if you get a particularly anal underwriter!).

Regards,

Mark

So a contractor with bench time would be better off not using a special "contractor mortgage" if their income is sufficient for the amount borrowed?

[MarillionFan]

I was only after £15k - the IFA didn't mention amounts as such - it's partly due to the loan/equity value and partly due to two years accounts. They never asked me about the future

Just spotted your Avatar. Fantastic.

[Mark McBurney@CMME]

I've never been asked anything about how much time I was on the bench. I've been asked how much I personally make each year, for the headline figures from company accounts, and to explain why these values varied, but not that.

Hi d000hg,

This is because using accounts is the more traditional 'self-employed' assessment of income, looking at historical income via accounts which is proven by the actual figures, so gaps don't matter - it should only become relevant about down time if you're looking to apply based on contractor-criteria (or sometimes with the few lenders who will look at 1yr accounting history, if you get a particularly anal underwriter!).

Regards,

Mark

[Mark McBurney@CMME]

Even a week gap? As in finish one contract, get anohter straight away.

Hi Psychocandy,

No, in excess of 6 weeks in each calendar year.

Regards

Mark

[psychocandy]

Generally you need at least the last 12 months gap-free. If you've got this, you may have options regardless of even a six month gap 12+ months ago.

Two of the most prolific contractor lenders, Halifax and Clydesdale Bank, won't lend if you've had any more than c.6 weeks as a gap in the last year, unless there's a valid reason for it in their mind. Clydesdale are slightly more amenable to a sanction if the rest of the application is up to scratch, but with 6 months of gaps over the past two years, you really will struggle, sadly.

Even a week gap? As in finish one contract, get anohter straight away.

[d000hg]

I've never been asked anything about how much time I was on the bench. I've been asked how much I personally make each year, for the headline figures from company accounts, and to explain why these values varied, but not that.

[flamel]

Did you extend your loan by a significant amount? I'm going from £100k ->£180k

I was only after £15k - the IFA didn't mention amounts as such - it's partly due to the loan/equity value and partly due to two years accounts. They never asked me about the future

[Mark McBurney@CMME]

What about if I went by my accounts rather than day rate? Do they still look at gaps? I know the loan amount would be less but I have another option to extend my current house which would obviously require a much smaller loan.

If you're using account to prove income, the contract is irrelevant, as accounts show your historical income over the last 2-3 years, rather than your current ongoing work, so provided the gaps don't impact on the profit/your personal drawings too much then this is probably the only solution for someone with 'excessive' (in the eyes of a mortgage lender) gaps.

[Gumbo Robot]

I'm benched at the moment and applying for additional mortgage - what they wanted was the last two year's accounts - no mention of ongoing contract work or forecasts required - that was with Santander. The accounts had to be done by a professional firm though.

Did you extend your loan by a significant amount? I'm going from £100k ->£180k

[flamel]

Company.

I'm benched at the moment and applying for additional mortgage - what they wanted was the last two year's accounts - no mention of ongoing contract work or forecasts required - that was with Santander. The accounts had to be done by a professional firm though.

[Gumbo Robot]

Company accounts or personal accounts???

Company.

[northernladuk]

What about if I went by my accounts rather than day rate? Do they still look at gaps? I know the loan amount would be less but I have another option to extend my current house which would obviously require a much smaller loan.

Company accounts or personal accounts???

[Gumbo Robot]

Generally you need at least the last 12 months gap-free. If you've got this, you may have options regardless of even a six month gap 12+ months ago.

Two of the most prolific contractor lenders, Halifax and Clydesdale Bank, won't lend if you've had any more than c.6 weeks as a gap in the last year, unless there's a valid reason for it in their mind. Clydesdale are slightly more amenable to a sanction if the rest of the application is up to scratch, but with 6 months of gaps over the past two years, you really will struggle, sadly.

What about if I went by my accounts rather than day rate? Do they still look at gaps? I know the loan amount would be less but I have another option to extend my current house which would obviously require a much smaller loan.

[Mark McBurney@CMME]

Generally you need at least the last 12 months gap-free. If you've got this, you may have options regardless of even a six month gap 12+ months ago.

Two of the most prolific contractor lenders, Halifax and Clydesdale Bank, won't lend if you've had any more than c.6 weeks as a gap in the last year, unless there's a valid reason for it in their mind. Clydesdale are slightly more amenable to a sanction if the rest of the application is up to scratch, but with 6 months of gaps over the past two years, you really will struggle, sadly.