Reply to: Applying for a mortage

[Freelancer Financials]

Yes, that would have been far better.

A recurring theme on here is newbie contractors not understanding the difference between permie-type employed, self-employed and being an employee+shareholder of a LtdCo. That is understandable, but occasionally we get suppliers of financial services and even supposed accountants also getting it wrong. And they tend to do so when suddenly posting to lots of threads.

So they simultaneously advertise their services (against the rules), give incorrect advice and effectively spam us by resurrecting old threads just so they can get their name on here lots of times.

And because you did all that in the past few hours, I assumed you came under the same heading.

I do see your point But reponding to a post in February is not exactly resurrecting old threads! It's been a while since I was last on the forum so I searched on questions and queries relating to financial services.

I'm only interested in giving good advice. No need to spam! If contractors are interested in my service or help it's easy to find me.

Nonetheless, I respect where your coming from and understand your concerns.

[MarillionFan]

A recurring theme on here is newbie contractors not understanding the difference between permie-type employed, self-employed and being an employee+shareholder of a LtdCo. .

There is no difference. You're all disguised employees.

Hector.

[RichardCranium]

Perhaps I should have replied "If you are working through your own limited company lenders typically view contractors with a limited company as self-employed for underwiting purposes".

Yes, that would have been far better.

A recurring theme on here is newbie contractors not understanding the difference between permie-type employed, self-employed and being an employee+shareholder of a LtdCo. That is understandable, but occasionally we get suppliers of financial services and even supposed accountants also getting it wrong. And they tend to do so when suddenly posting to lots of threads.

So they simultaneously advertise their services (against the rules), give incorrect advice and effectively spam us by resurrecting old threads just so they can get their name on here lots of times.

And because you did all that in the past few hours, I assumed you came under the same heading.

[Freelancer Financials]

No, as an employee you draw a salary. As a share-holding director you get a dividend.

You are doing yourself a disservice here.

I'm not sure what the point is that you are trying to make!

I think most contractors with a limited company are aware of their contractor status. I'm simply responding to a contractor who has a genuine query on how their application will be viewed by a high street lender.

Lenders struggle to define "Contractors employment status" as they are seen to be a hybrid when being viewed by underwriters. As Dave Chaplin quotes in CONTRACTORS' HANDBOOK "Contractors inhabit a space where they are not employed, yet they are not self-employed".

For lending purposes the majority of high street lenders view a contractor with a limited company as self-employed when underwriting a mortgage application. Most lenders will ask contractors with a limited company to produce 2-3 years accounts and will base their lending criteria on the contractors salary and dividend drawings.

I agree with you that as an employee you draw a salary and as a share-holding director you get a dividend.

Perhaps I should have replied "If you are working through your own limited company lenders typically view contractors with a limited company as self-employed for underwiting purposes".

And I don't think I am doing myself a disservice here.

[MarillionFan]

baby girl, let us know how you get on.

It used to be that contractors would use self cert, or at least 3 years worth of accounts.

I purposely went perm(initially for three months) to get a large mortgage a few years back, but now I've gone back to contracting, Im not sure where I stand either.

[RichardCranium]

In the strict legal sense as a director in so far as you draw a salary, you are taxed as an employee (schedule E), however you are in business on your own account as a contractor trading through a limited company that you own and control and for this reason lenders (the underwriters) will treat you as self-employed.

No, as an employee you draw a salary. As a share-holding director you get a dividend.

You are doing yourself a disservice here.

[Freelancer Financials]

You do know LtdCo contractors are NOT self-employed, don't you?

In the strict legal sense as a director in so far as you draw a salary, you are taxed as an employee (schedule E), however you are in business on your own account as a contractor trading through a limited company that you own and control and for this reason lenders (the underwriters) will treat you as self-employed.

[RichardCranium]

If you are working through your own limited company then you are a self-employed contractor.

You do know LtdCo contractors are NOT self-employed, don't you?

[Freelancer Financials]

Contractors with a limited applying for a mortgage

Hi,

I just need a bit of advice, I want to apply for a mortage, but I'm not too sure to apply as a director or as an employee, I was wondering whether to just produce my contract or go to the high street banks with my company accounts.

Also, has any one of late (in 2010 ) used any services f"or providing mortages" to contractors helpful.


Helpful advise is welcome.

Thanks

If you are working through your own limited company then you are a self-employed contractor. You're probably a majority shareholder and an officer of your company.

For lending purposes the majority of high street banks will assess you as a self-employed contractor with a limited company. Most lenders will ask you to produce 2-3 years accounts and will base their lending criteria solely on your salary and dividend drawings, ignoring any underlying company profits.

As you’re probably aware, for tax reasons, many contractors working through a limited company draw a minimum salary and also restrict dividend payments to avoid higher rate tax. This has the unintended consequence of reducing the amount a contractor is eligible to borrow under the standard criteria used by most mortgage lenders.

This is why it is often better to seek the advice of specialist mortgage brokers. The key is to ensure that the loan application is properly packaged and falls in front of the right decision makers within the lending institutions.

A good specialist mortgage broker will have direct contact with key people within the lenders Head Office underwriting teams and hopefully, like ourselves, will be able to base your earnings on a simple multiple of your contract rate alone.

This means that you dont have to rely on the traditional method of using accounts, which will not fully reflect the total earnings that you have at your disposal, for income verification on a mortgage application.

Whilst most mortgage brokers will charge you a broker fee I'm very proud to say there are still a number of brokers who, like ourselves, are able to deliver this service without cost to the borrower.

[The_Equalizer]

Here is a thread I recently started on the subject:

Mortgages - Yawn!

I managed to get one direct with the Woolwich although I have yet to take them up on the offer as the house of my dreams slips through my fingers.

[rsingh]

Contractor Mortgage Quote

Give these guys a try, have been very helpful for me. If you have a contract in place they are able to source deals where a multiple of contract value is offered. So no need to try and explain to a front-line monkey about your set up and get them all confused.

WHS

I got my mortgage through them. They were very helpful. They can base the mortgage on the value of your contract.

[BabyGirl_1]

Contractor Mortgage Quote

Give these guys a try, have been very helpful for me. If you have a contract in place they are able to source deals where a multiple of contract value is offered. So no need to try and explain to a front-line monkey about your set up and get them all confused.

Thanks, I'll give them a call.

[administrator]

Contractor Mortgage Quote

Give these guys a try, have been very helpful for me. If you have a contract in place they are able to source deals where a multiple of contract value is offered. So no need to try and explain to a front-line monkey about your set up and get them all confused.

[DS23]

oh, and take my advice - don't listen to me.

[DS23]

my advice is to learn the difference between advise and advice. you get an awful lot of both on this forum and they frequently come disguised as the other.