How to Handle Your Income When Applying for a Mortgage as a Contractor
How to Handle Your Income When Applying for a Mortgage as a Contractor
Blog Article
Why Income Is Important
When applying for a mortgage as a contractor, your income is one of the most important factors that lenders will assess. However, unlike salaried workers, contractors have fluctuating income, which can make it harder to provide a consistent history.
How Lenders Assess Contractor Income
Lenders typically use different methods to calculate your income, including:
Daily or Hourly Rate: Lenders will often multiply your daily or hourly rate by the number of days worked each year.
Contract Length and History: A long, ongoing contract is a good sign of stability. Lenders may use contracts that last six months or more as proof of consistent income.
Self-Employed or Limited Company Income: If you operate through a limited company, lenders will look at your salary and dividends.
Proving Stability
Even if your income fluctuates, showing a consistent history of contracts in the same industry helps lenders view you as a stable candidate. If your contract renewals are regular and you have no large gaps between them, lenders will see you as a more reliable borrower.
How to Present Your Income
Keep Your Accounts Up to Date: Whether you're self-employed or a limited company contractor, make sure your financial records are accurate and current.
Save Bank Statements: Lenders may request the last three to six months of bank statements to verify your income and expenses.
Provide Contracts or Payslips: These documents are essential, especially for umbrella company contractors.
Work With a Specialist Broker
A mortgage broker who specialises in contractor mortgages can help you present your income in the best possible light. They know which lenders are most flexible when it comes to contractor income and can help you avoid rejection.
Conclusion
Handling your income properly when applying for a mortgage as a contractor is key. With the right documentation and expert help, you can secure the mortgage you need.
Need help with income verification? Contractor Mortgage Solutions offers expert guidance on how to handle your income for mortgage approval.