Overcoming the Hurdles Contractors Face in the Mortgage Market

Estimated reading time: 4 mins

There are a lot of pluses to being an independent contractor or freelancer. You get to choose your own working hours. You get to decide which clients you do and do not want to work for. You are your own boss who makes decisions that are in the best interests of your company. But with all those advantages, contracting and freelancing do have their disadvantages as well.

For example, have you ever tried to get a mortgage as a contractor? It is not the easiest thing to do. Ever since the housing crash and its subsequent financial collapse a decade ago, lenders have been a lot more discriminating about approving mortgages. Borrowers now have to jump through many more hoops than they used to.

What’s the solution? More often than not, it is working with a mortgage broker. A mortgage broker can do things for the contractor that traditional lenders cannot. The services they offer also tend to be faster, more efficient, and more accommodating of contractor and freelancer needs. If you’re curious, just go online and look for a contractor mortgage advice guide. You might be surprised to learn what mortgage brokers can do for the self-employed.

Proving Your Income as a Contractor

Anyone who attempts to borrow money to buy a home has to prove income. There is nothing unique about that to contractors and freelancers. What is unique is the means by which self-employed people prove their income. This just also happens to be the biggest hurdle for getting a contractor mortgage.

When a traditional worker seeks a mortgage, he or she can produce a number of payslips along with last year’s P60 and a tax return and call it good. That’s enough documentation to prove the employee’s income. It is not so easy if you are self-employed as a contractor or freelancer.

Proving your income generally requires quite a bit more work. You might have to produce balance sheets for several consecutive quarters along with bank statements, invoices, and several years’ worth of tax returns. You essentially have to prove a longer history of sufficient income because, as a contractor, there is no guarantee you will have work tomorrow. All of your documentation proves you have the ability to keep yourself busy with enough work to bring in the necessary income.

How a Broker Can Help

The need to prove one’s income doesn’t change just because a mortgage broker is handling the task of finding willing lenders. However, there are still certain advantages to going the broker route. For example, let’s start by talking about mortgage deals offered exclusively to brokers.

There are lenders out there who value the services brokers offer. In order to entice brokers to continue doing what they do, these lenders offer mortgage deals that can only be obtained through them. You can get them at the bank. You cannot get them by applying directly to the lender in question.

Guess what? Some of these loans pertain exclusively to contractors and freelancers. They are tailor-made loans that meet the unique needs of self-employed workers who cannot necessarily prove income in the same way a traditional employee can.

Next, consider the idea of shopping around. Even if you went down to your bank and found they were willing to loan to you, being a contractor or freelancer virtually guarantees your bank will charge you the highest possible interest rate along with a litany of fees and charges.

Things are different with a mortgage broker. It is part of the broker’s job to shop around for the best possible deal. Your typical broker may have dozens of different mortgage products to look at, one or two of which would be ideal for your circumstances.

Advice and Assistance

The icing on the cake here is that a mortgage broker offers both advice and assistance. Bear in mind that a mortgage broker is also a financial adviser whose job is to find the right mortgage deal that is the best for your overall financial circumstances. With that deal comes a sound advice. It is advice you will never get from a bank.

Finally, a mortgage broker offers the contractor assistance at every step of the application process. A good broker ensures the paperwork is completed correctly before submitting it. A good broker deals directly with lenders on the client’s behalf. In short, you get all the assistance you need to complete the mortgage process seamlessly and quickly.

The reality is that contractors and freelancers have some extra hurdles to overcome when applying for mortgages. Working with a mortgage broker makes clearing those hurdles a lot easier.

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