Many concrete contractor glendale ca are convinced that they can secure mortgage on their own without the assistance of a contractor mortgage specialist. This attitude quickly changes after they have approached several banks only to be declined. The problem lies with many local bank branch staff or call centres. There’s nothing worse than being told by some young graduate quoting their standard script that you can’t obtain a mortgage because you have insufficient income to support the mortgage loan you are applying for. Or a call centre based in Delhi who simply don’t understand your employment status as a contractor. Unfortunately, they are not trained to understand the contracting environment that you work in let alone the trading structures and payment mechanisms that contractors use. So if you’re fed-up of being asked questions that have no relevance to your employment status, like employer’s details, evidence of time employed, pay slips and so on, our recommendation is that you contract a contractor mortgage specialist who has experience arranging contractor mortgages.
2. Secure a mortgage based on your contract rate
If you’re fortunate enough to find a lender that doesn’t flinch after you’ve told them that you’re a contractor, they will then want to assess your affordability using their self-employed criteria for Limited company directors. This means that they will want to assess your mortgage borrowing based on a narrow measure of your director’s remuneration, which may not fully reflect the total earnings that you have at your disposal. They will need to see three years accounts, which exclude contractors who haven’t been working long enough to produce three years audited accounts. For those contractors that can provide three years accounts, they will be assessed on the physical drawings they are taking from their limited company, not taking into account retained profits.
Most contractors who operate through their own limited company don’t draw all their annualised income in salary and dividend drawings. For tax purposes, it makes no sense, instead the majority of contractors operating in a tax efficient way draw a minimum salary and also restricts dividend drawings to avoid higher rate tax. While this makes perfect sense from a tax planning perspective, it has the undesired effect of reducing the amount that contractors are eligible to borrow under the standard criteria used by most lenders.
Contractor mortgage specialist have worked hard over the past 10 years to develop strong relationships with high street banks in relation to simplifying what qualifies as relevant earnings for lending purposes for contractors. They have been influential in changing the underwriting criteria for contractors.
There are a now a number of high street lenders that will provide mortgages for contractors based on gross contract earnings. The mortgage loan can be as much as 4-5 times your annualised contract earnings. This means that you don’t have to rely on the traditional method of using accounts.
In order to calculate how much you can potentially borrow based on contractor based underwriting, you need to multiply your daily contract rate by the number of days you are working in a week followed by 48 weeks. In most cases you can secure a mortgage of up to 4 times this figure. For example, a contractor on a daily rate of 500 can potentially borrow:
