The Client:
The client had worked on multiple contracts, which causes complications on the underwriting side and narrows the number of lenders to approach. They were looking to purchase a residential property and had good credit.
The Scenario:
There are lenders who will say that they will accept multiple contracts however when the underwriter’s review, they will not feel comfortable for the client to work 50-60 hours a week” even if the position is not physical at all. These lenders have double standards and discriminate against contractor applicants. They would take the overtime income of employed applicants working a 48 hour contract and doing an extra 12 hours overtime – these have been clear practice especially in the healthcare sector.
At this point we would go to lenders who use a bit of common sense and can take up to 3 sources of income – the contractor day rate multiples are on the more conservative side (day rate x 5 x 41 opposed to the 46 multiple) however the income multiples will still be favouring the clients.
Our client’s original application took a halt after the lender exceeding the widely advertised 10 working days SLA and reached a halt 8 weeks in the underwriting the lender saying they will only use the main contract due to not seeing how it would be feasible to work 40 hours on a main contract and being 20 hours on retainer.
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The Solution:
With great disappointment after hours of manpower poured in the application we had looked elsewhere – we approached a lender who were happy to take both contracts into account and said they would consider up to 3 if need be.
Summary:
Contractor applications can be complex. And not all lenders can consider them favourably. The current view of contractors is divided. Most of the high street lenders would consider them as self-employed unless they fall under IR35. Some will use the day rate if the income is over £75,000, then we have the lenders who will use a multiple of the day rate.
With our contracting clients it is important we find the best way to increase their affordability, and, in most cases, this would be using a multiple of the day rate.
If you’re a Contractor with Mortgage questions or would like some free advice, contact us today to speak directly with one of our CeMAP certified Mortgage Advisors. Call us today on 03330 169 646. Alternatively, please complete this short online form and one of our Advisors will call you right back.