Thankfully, gone are the days where banks, building societies and mortgage lenders would flatly turn down a contractor for a mortgage, based on the misconception that it’s risky to lend to someone who is self-employed.
As contracting has become mainstream, more lenders are approving mortgage applications from contractors.
Yet, there are some lenders who remain cautious. So, here’s our top advice on how to increase your chances of getting your mortgage application approved.
Save a large deposit
Today, most lenders require you to have at least a 10% deposit. However, if you’re in a position where you can save a larger deposit, say 15% to 20%, we’d recommend you do so. Being able to put down a larger deposit means you’ll have access to a wider range of mortgage products with better interest rates.
If you can hold off purchasing a property for another year or so while you save a larger deposit, you could save thousands of pounds in interest in the long run.
Maintain a healthy credit record
One of the first things a bank, building society or mortgage lender will do when they receive your mortgage application is to perform a credit check on you and anyone else named on the application.
It’s important that everyone who is named on the application has a healthy credit score. As anything like missed credit card payments, lapsed mortgage repayments or CCJ’s (County Court Judgements) may hinder your application.
Surprisingly, a lack of credit history can also work against you. So, while it’s amazing that you’ve managed to be credit-free for this long, it may be worth taking out some form of credit and clearing it immediately after purchasing a property.
If you’re not sure what state your credit history is in, you can easily obtain a copy online. Most of the time it won’t cost you anything to do so. We recommend that you get a copy of your credit score if say in nine months to a years’ time you know you’ll be looking to purchase a property. This gives you the chance to review your record and rectify any issues.
Have all the necessary documents ready
As part of the mortgage application process, you’ll be required to supply evidence of your income, expenses, identity and address.
It’s surprising how many people find that they either don’t have these documents or that they are no longer valid. So, before approaching a mortgage lender or a mortgage broker spend some time getting all your paperwork together.
Don’t do it alone
According to the FCA (Financial Conduct Authority), there are approximately 340 regulated mortgage lenders in the UK. Each of these will have multiple products, meaning there could be thousands of different mortgage products available.
It’s practically impossible to manually compare all these different products. Luckily, there is a simpler solution – engage with an authorised mortgage broker or IFA (Independent Financial Advisor) who has the industry know-how and software to compare the available products to find the best one for you.
The IFA or mortgage broker will also liaise with the mortgage lender, freeing up your time to focus on other things.
If you’re an Aardvark Accounting client and would like to engage the services of a qualified mortgage broker or an Independent Financial Advisor (IFA), we’ll be happy to connect you with people who understand the unique needs of contractors. Just give your Personal Accountant a call.
If you’re not an Aardvark client but would like the kind of service that takes into account all of your financial needs as well as offering a great contracting accounting service, give us a call 01425 471917, or send us a message.