Mortgage for Subcontractors
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Mortgage for Subcontractors
James Best explains how the mortgage process works for subcontractors.
Can a subcontractor get a mortgage? What do subcontractors need to qualify for a mortgage?
Absolutely, yes, they can get a mortgage. We will need a bit more information from subcontractors compared to other employment types, largely because of how different their incomes can be.
Some contractors are on a day rate, some have fixed term contracts and some have longer term arrangements. It can really vary with which category you fall into. Essentially, it’s about proving you’ll have a stable income during the whole mortgage term.
In most instances, we do this by showing a track record of that income, or your experience in the same field. Those are the things that advisors seek to understand, so that when we make your application to the most suitable mortgage lender for you, we can present it in the best possible light. That gives us the best possible chance to get your application approved.
Do different lenders have their own rules for subcontractors looking to get a mortgage?
Yes, they do. Every single lender will have their own rules and their own way of interpreting a person’s income and circumstances. There isn’t a one-size-fits-all, so with the same information, you’ll get different outcomes from various mortgage lenders.
That’s why it’s best to provide us with all the details, so that we can look at the information on your current contract, your work history, income and commitments. Then we will know how to tailor your application and which mortgage lenders will give us the best terms.
Are there any special mortgage options just for subcontractors?
Yes, and not all lenders offer them. Your own bank or building society might tell you that a mortgage with them isn’t possible, but it’s well worth getting a second opinion. The right lender may certainly be able to offer you something.
Some contractors can get a higher mortgage amount in certain situations, so it can definitely work in your favour. I’ve lost count of the number of clients who have come to me having been told they can borrow a certain value, but when we’ve gone through all the figures and lender options, they can afford something completely different.
It’s worth speaking to a qualified mortgage professional with knowledge of the whole of the market. We’ll know what your options are and guide you through them.
What documents do subcontractors need when applying for a mortgage?
In addition to your identification, bank statements and proof of deposit (if applicable), you will need a copy of your current contract. If it’s due to change, you’ll need a copy of a future dated one, if that’s available.
We would also need an understanding of your work history for the last year or two. It helps to collect that information from previous employers, previous contracts and old P60s to demonstrate skill and expertise in your field.
Then, for example, if your contract is due to finish in the next few months, we can demonstrate that you’ve been working in this field for a number of years and it’s not going to be an issue. Your experience suggests you will get a new contract, so we can place you with a lender that is happy to accept that risk.
It’s different for everybody. So speak to a qualified mortgage advisor, explain your circumstances, and we will tell you specifically what we need from you.
How much deposit is needed for a mortgage as a subcontractor?
It’s exactly the same across the board. Deposit levels aren’t increased and products aren’t restricted just because you’re a subcontractor.
You’re able to enjoy the same options as if you were employed or self-employed, with the same level of deposit. There are some schemes that are only applicable for First Time Buyers, but generally the deposit requirements would be the same.
How much can subcontractors typically borrow based on their income?
Because of how different contracts can be, it’s not just checking a few pay slips as we would with someone that’s employed. How the lender assesses your borrowing will vary depending on what type of contract you’ve got, how long you’ve worked in the industry and various other factors.
But it’s unlikely your mortgage amount will be restricted. If we get all your information together, you’ll get the same borrowing as a non-subcontractor. Potentially, you might be able to borrow more if your contract is one that lenders value, or you’re working in a sought after industry or specialist field. So get in touch and we’ll be able to tell you exactly what mortgage size you can get.
Speak To an Expert
Come on in and be quite forward with what you’re after – just be very honest with your mortgage broker. It’s good to make sure that we know absolutely everything about you. That way we can’t be blindsided by a lender. An open book policy is very good when coming to see your mortgage broker.
Can subcontractors use their self-employed status to get a mortgage?
Yes, certainly, if it’s beneficial to them. When I’m dealing with a contractor who is also self-employed, I would get the whole picture, because lenders interpret incomes and client circumstances differently.
Sometimes looking at an application in a certain way can get you a larger mortgage with one lender than another. It’s more to do with a subcontractor’s circumstances as a whole. So if we’re looking to try to get you the highest mortgage that’s affordable for you, or to buy a particular property, I will know which lender can push the borrowing up enough for you to do it.
Being self-employed can actually work in your favour with how some lenders interpret your income. They might look at annualised figures rather than the current contract. It’s well worth getting in touch, because there can be significant differences between what you can get from one lender and another, depending on the information we’re using.
Do subcontractor mortgages usually come with higher interest rates?
No, not necessarily. The interest rate will depend more on your affordability, credit score and your deposit. There are some other factors, but those are the most common ones.
The source of your income, whether that’s subcontracting, self-employment or an employed salary won’t alter the interest rate. Essentially, just speak to a qualified mortgage professional with access to as many mortgage lenders as possible – because we have more choice in finding the right fit for you.
Can subcontractors with a bad credit history still get a mortgage?
Absolutely. The main thing is to get a copy of your credit file, which goes back over the last six years. If you have any credit blips, talk that through with an advisor and explain the circumstances around what happened.
There are lenders that consider people with issues on their credit file – whether those are in the past or more serious things have happened.
The main thing is to get the story behind what’s happened. With a lot of these lenders, it’s not a computer-based decision and your application will be on a human underwriter’s desk. We can explain the circumstances of what led to this bad credit situation.
Ideally, things will have got a lot better with no repeat issues. An underwrite uses that information to decide whether to offer you a mortgage. So get your credit reports printed out and talk through them with someone you feel comfortable with.
The long and short of it, however, is that there’s no difference if a subcontractor has bad credit compared with anyone else.
Do you need to have worked as a subcontractor for a certain amount of time to qualify for a mortgage?
This varies widely. Some lenders will require a certain amount of contract history – typically 12 months – while others are happy with a shorter amount of time. It depends on the type of contract and the industry you work in.
Your industry and experience will always trump how long you’ve been contracting for. Some mortgage lenders won’t be happy if it’s your first contract or you’re only three months into your first one. But if you have worked in that industry for a long time before contracting, most lenders will be happy to accept that risk.
We’ve had mortgages go through on day one of subcontracting, based on the client’s experience in that industry.
What can subcontractors do to boost their chances of getting approved for a mortgage?
Get all your paperwork together to show your current, future and previous contracts and circumstances.
Contact a broker that’s whole-of-market, as they will know all the specialist lenders, schemes and niches that will be applicable for you. Check your credit report to make sure that everything on there is correct, even if you’ve never borrowed anything in your life.
We’ve worked with people who say they have never had an issue, but incorrect information on the credit report has then caused problems. It may have been avoided by checking beforehand. Just make sure everything on the credit report is accurate and it all stacks up.
If things do change with the nature of your contract, get in touch with us. We’ll talk through what those changes mean to your chances of getting a mortgage now or in the future.
How can a mortgage advisor or broker help?
I think we’ve covered the most typical questions and angles. These cases, for the self-employed and subcontractors are always so different from each other. I could have 10 subcontracting clients where their circumstances, types of contract and lending would all vary significantly.
A mortgage advisor will help you understand your circumstances. If you’ve already been told no, or someone that does a similar job to you has been rejected, don’t worry. Perhaps they didn’t go to the right person for help – and their circumstances won’t necessarily be the same as yours.
If you’re looking for a mortgage as a subcontractor, we can easily tell you what you need to do, what information we need and the direction we need to go in.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.