Contractors are in an enviable position sometimes because they are provided with an income for a set period of time but are allowed flexibility in the long term. Tax changes are altering the make-up of a contractors employment status but getting a mortgage isn’t always as difficult as some would imagine.
What income can be used?
Lenders will sometimes use what is called your daily pay rate. Typically, a workplace will provide a contract with a day rate, and we have some lenders who will use the following calculation to determine the affordability and NOT what you declare on your tax return;
Day rate x 5 x 46 = Annual Income
There are some lenders who are able to use the same calculation even if you are contracting via your own Limited Company.
CIS workers however are a type of contractor where some lenders will require as little as 3 months’ payslips/remittance slips to evidence your income. Usually though we will need to see at least 6 months’ worth.
What evidence will need to be supplied?
As you can imagine there are huge advantages to this style of employment when it comes to getting a mortgage. Not every lender works with this type of income make-up, and we need to ensure that there is a level of sustainability in the role. To do this we would normally need to see a current signed contract and evidential income history – such as prior contracts and renewals.
Obviously, the Pandemic has had some kind of impact on most people who are self-employed, whether this is an increase or a reduction in business. If you have taken any form of government support throughout the Pandemic this does NOT mean that you will automatically be declined for a mortgage. Each client will be considered on their own merits.