Lenders generally look for fixed-income applicants with low credit risk to lend at a lower risk. On the other hand, Lenders behave differently in the face of contractors based on their assessments of contractors’ credit risk.  

For example, Lenders often have different criteria and conditions for contractor mortgages. Criteria such as credit score, deposit amount, how contractors calculate income, and the number of contractors’ assets affect the rate of mortgages and the type of mortgage products. That’s why finding the best lenders for contractors is a complex and challenging task. It will also be difficult for borrowers to choose a product from the wide range of products on the market. In this article, the criteria and conditions that lenders usually consider when mortgages for contractors are provided.

Credit score

The most important factor lenders consider when mortgages for contractors is their credit score. Contractors’ credit scores are related to their income and the timely payment of their installments and debts. The more contractors can pay off their debts and mortgage installments on time, the higher their credit score. However, lenders consider the minimum credit score for mortgages for contractors, and contractors should consider this when referring to lenders.

The amount of required deposit 

If contractors can raise more deposits for their mortgages with more savings and lower costs (even if their credit scores are poor), lenders will provide several options and better rates and conditions.

How to calculate income

Usually, contractors do not get their remuneration in bonuses and salaries to legally pay lower taxes. For example, limited companies and LLPs do not pay their contractors in the form of bonuses and salaries to pay less tax under the law, and this may be considered from the lenders’ point of view as less contractor income and show the contractor’s affordability less than their actual amount.

Limited companies or LLPs consider their payments to their contractors in other ways. It is important to note that many lenders are unfamiliar with the formulas contractors pay to their employees. In this case, the lenders may consider a mortgage with unfavorable conditions for contractor mortgages. But contractor-friendly lenders are aware of these formulas and can reasonably calculate the contractors’ affordability.

Mortgage rates

There is a wide range of contractor mortgages products on the market, each with a different rate and different calculation method. Fixed, variable, tracking and similar mortgages are available in the market. But not all of them are eligible to repay the installments. Lenders offer these mortgages to the market without considering the needs and conditions of the contractors. But there are also limited lenders who consider the products and conditions more suitable for contractors according to their needs and conditions.

Type of partnerships

Depending on their type of activity, contractors may operate in various forms such as limited companies, umbrella companies, limited partnerships (LLPs), and the like. Each of these companies has different advantages and disadvantages. Depending on contractors’ type of activity and profession, each company has different tax rules and regulations, income, and functions. Finding lenders familiar with this type of contracting activity is complex and requires extensive research in the contractor mortgages market. Knowing the partnership type of contractors in a real and legal way is an important issue that is a big challenge for lenders to determine the rates and terms of mortgages for contractors.

Type of industry

In general, the nature of contractors’ work is that they operate in different industries. Construction, IT, medicine, law, technology, nursing, maintenance, and teaching are a wide range of industries in which contractors operate. But lenders are only familiar with some of these industries and offer suitable mortgages to contractors working in a limited number of industries. Therefore, finding a lender who is familiar with different areas of contracting activity and can offer suitable products requires a lot of time and energy. In addition, referring contractors to lenders who are not in the relevant field of expertise may reject the mortgage application or get inappropriate rates and conditions for them.

Duration of mortgage application

Applying for contractor mortgages may take a long time due to the complex nature of their work. Stretch. Therefore, it is important to find a lender who has sufficient experience with contractor mortgages and is familiar with the nature of their work; because it saves much time when applying mortgages for contractors.

Type of lenders

Choosing the type of lenders is important in that the applicants need to find a lender who is contractor-friendly and familiar with how contractors, freelancers, and independent professionals work. The applicants should also find a lender with a high degree of flexibility in designing contractor mortgages products and products that meet the lenders’ needs and conditions. So finding contractor-friendly lenders is very important; because they must have enough flexibility in designing their products and make significant changes in the design of their products.

Type of mortgages

The type of mortgages is also very important in mortgages for contractors. Some contractors are looking for different mortgages depending on their needs and circumstances. Large mortgages, buy-to-let mortgages, investment mortgages, and residential mortgages may be different needs of contractors. But not all lenders offer these products and are unfamiliar with them. So it’s important to find a lender that offers a wide range of mortgages. For example, portfolio financing mortgages, commercial investment mortgages, limited company mortgages, and buy to let mortgages are among the investment mortgages.

Broker

One of the most important things to consider when considering contractor mortgages is to use a specialist contractor mortgages broker. A contractor mortgages broker is fully acquainted with the nature of the contractors’ work and works with lenders who can calculate the credit score and income of the contractors correctly and can get favorable rates and conditions from the lenders based on the type of contractor’s partnership.

This article addressed the factors influencing lenders’ decisions in contractors’ mortgages. As mentioned above, many factors influence lenders’ decisions, and on the other hand, it will not be easy to find a lender who is familiar with the terms and needs of the contractors. Therefore, in this way, contractors are better to use the advice of a specialist contractor mortgage broker. A professional and experienced broker will identify the type of contractor’s mortgages and, based on that, will find contractor-friendly lenders.

AWS Mortgage specialist advisors get to know the lenders who provide the mortgages for contractors in the shortest time and at the desired rates and conditions, following the type of industry and the contractors’ partnership and based on their exact income and credit score. Collaborate. AWS Mortgage specialist advisors, with years of experience in the field of contractors’ mortgages, are aware of the details and complexity of contractors’ mortgages and negotiate with lenders to get suitable mortgages for contractors. You can talk to our advisors to find the rates and conditions you want safely.