Breaking news: mortgages for all professional contractors

ANY professional contractor can now apply for a mortgage based on their daily contract rate through Halifax.

Previously Halifax, which is the UK’s largest lender, only offered contractors mortgages based on a multiple of their contract rate if they worked in IT.

However, it has now expanded its mortgage offering to allow all professional freelancers to benefit from contract based income criteria regardless of the sector they have chosen to specialise in.

John Yerou, of Freelancer Financials, says: ‘This is a major milestone for the UK’s freelance community as it unbolts the contract based mortgage market to any professional freelancer.’

‘Britain today has a higher number of self-employed contractors and freelancers than ever before’

Why is this good news?

The change is great news for non IT contractors because it means they will no longer be assessed based on a multiple of their salary and dividend drawings.

Most contractors with limited companies choose to draw a low salary and minimise dividends as this is the most tax efficient way of operating.

But while intelligent tax planning, this had the knock-on effect of reducing how much lenders allow you to borrow. 

By allowing freelancers to take out a mortgage based on their contract rate this will be avoided.

The move is especially good news for contractors just starting out as unlike many other lenders which demand at least two years of uninterrupted contract history Halifax will accept freelancers from their very first contract.

What’s more, non IT contractors will no longer be saddled with the burden of having to provide a minimum of one year’s worth of accounts – which is useful for new contractors who might struggle to provide this.

How much can I borrow?

You need to be on a minimum pre-tax daily contract rate of £300 or earning at least £75,000 a year to apply.

To work out how much you can borrow simply multiply your daily contract rate by the number of days worked each week, and then multiply this by 48.

Take this total, times it by five and this should give you a rough indication of how much you can potentially borrow.

For example, a typical contractor earning £475 a day has an annual gross contact income of £114,000 (£475 x 5 x 48). This could allow you to borrow up to £570,000 to buy or remortgage a property.

Before attempting to apply for a mortgage directly, we strongly recommend that you speak with a mortgage specialist first. It is not worth the risk of going to a standard mortgage broker that doesn’t have the knowledge or experience in securing mortgages for contractors.

You should also be aware that multiple credit searches will leave foot prints on your credit history – and too many searches can have a serious impact on your score.

For further information on how you can qualify for a Professional Contractor Mortgage click here or contact one of our friendly advisors at Freelancer Financials on 020 8421 7999 quoting Qdos Consulting.

By:Steven Bailey

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