IT Contractor Mortgages and Pensions

This article was written by Tony Harris from Contractor Financials

It is fair to say that times have been tough in the housing market since early 2008 when the 'credit crunch' pulled the carpet from underneath the feet of millions of homeowners.

However, since the start of 2010 there has been an increase in confidence in the housing market and many contractors have been getting back on the ladder. Here we look at the options available:

Contractor mortgages - options available

The restrictions on lending since the start of the credit crunch have made securing a mortgage as a freelancer increasingly difficult.

For the last fourteen years we have been negotiating specialist underwriting terms for Contractors which allows us to arrange your mortgage based on a multiple of your annualised contract rate rather than the traditional route which requires three years accounts and multiple references.

Over the last decade this contract based underwriting has made home ownership a reality for thousands of contractors. However, it hasn't always been an easy ride.

Recently Barclays, one of the key lenders offering contract based underwriting since we negotiated these offers back in the 1990s, pulled their contract based products from the market.

In response to this, we have worked hard to speak to other banks and building societies to put in place alternative options for the UK's freelancer community and have managed to negotiate our specialist underwriting arrangements with a number of new lenders to replace Barclays' products.

In today's climate, it is vital that contractors package their applications in the best possible way in order to secure the mortgage they need without suffering from higher rates or a low loan to value (LTV).

A contractor specialist IFA should be able to offer you a mortgage based on a multiple of your annualised contract rate alone and should offer this service without charging you any broker fees. A whole of market agent will be able to search across all of the lenders products to find you the most competitive mortgage to suit your Contractor status.

We strongly believe that contractors should not be penalised for their working status and we pride ourselves on being able to offer 'high street' mortgages to the freelance community. We save you the hassle of trying to explain your contract based income to inexperienced branch staff and instead make sure your application is passed to key decision makers within the lenders centralised processing unit.

This ensures your application is processed quickly so you can get in to your new home and will prevent you from making multiple applications to various lenders which can be damaging to your credit profile.

At the moment, the types of mortgages available are severely restricted but this is by no means a reflection of your Contractor status. Since the credit crunch so called 'responsible lending' has became the order of the day and under pressure to be seen to be taking a more conservative approach, many mortgage providers have cancelled their self cert loans and cut back their interest only options to offer only a handful of lower loan to value schemes.

Interest only mortgages have long been the loan of choice for Freelancers, those borrowers who earn irregular commission or bonuses and thousands of buy-to-let investors.

This method of payment to the mortgage company offers the opportunity to pay a smaller monthly direct debit and as such keeps fixed outgoings to a minimum on the understanding that a proportion of the debt won't be repaid each month in the same way as a repayment loan.

Ultimately the mortgage will be repaid via ad hoc payments, the maturity of an investment or the sale of the property.

With all of these new restrictions in the mortgage market, it unsurprising that, according to the National Housing Federation, the average age of a first time buyer without parental assistance is set to rise to 43.

The lack of lower deposit mortgages is being largely blamed for this dramatic increase as people struggle to save the 15-25% required by most high street lenders.

This is a scary statistic for contractors hoping to take their first step on to the property ladder but if you are thinking about buying your first property then we still have access to a number of 90% mortgage options based on a multiple of your contract rate alone.

Contractor mortgages - find out more

To find out what options are available to you, simply fill in the form on our contractor mortgage enquiry page, and the Contractor Financials team will be in touch with you right away.