Having a complete picture
As a contractor, you will usually need to show evidence of your earnings for at least the past six months and some lenders might ask for figures for the last two or three years.
If you have been working as a contractor for a long time the amount you can borrow might be based on your average income. However, we know that your earnings could change significantly from year to year. This can be challenging for you if lenders look only at the most recent year or your lowest annual income to judge what might be affordable for you.
Without a contract of employment and regular monthly payments into your bank account it can be difficult to convince some lenders that you should receive a loan from them. However, some will consider a current contract which will continue for a further three to six months, so there are options to explore.
If you are paid on a ‘day rate’ lenders often want you to have a contract for a set number of days per week for a minimum of 12 months, but they will often only take account of 46 or 48 weeks of the year to allow for holidays.
How to make your mortgage application easier
To improve your chances of finding a competitive mortgage rate you can pay a larger deposit and reduce the amount you need to borrow, which lenders will see as a lower risk.
You can also ask people that you regularly work with to confirm your ongoing relationship or to provide evidence of regularly renewed contracts.
To give lenders confidence, plan ahead and minimise the number of breaks between contracts for the 12 months before you apply for a mortgage.
You can also make your life easier by maintaining good records of your expenses and operational costs to provide a clear picture of your financial position.
