People who work as a contractor, self-employed workers, part of a limited company, or short-term employees may be confused when estimating the amount of their mortgage. However, there are mortgages for these people that traditional lenders may not provide. Lenders offer mortgages to self-employed, fixed-term contractor Mortgages and short-term employees. Depending on the type of industry, borrowers’ affordability, and how to repay mortgages, the mortgages amount will vary.
But the most important thing that the lender must be sure of before paying the contract mortgage is to prove the mortgage applicant’s income. Lenders assess contractors’ affordability to ensure that they can regularly repay their mortgage instalments. Based on this, they estimate how much they should lend to the contractors.
In assessing the contractors’ affordability, lenders seek to answer how much the applicants are earning, how secure this income is, and contractors’ typical costs.
Lenders now use sophisticated methods to assess applicants’ mortgage rates. Lenders look at the income history and the contractors’ current and outgoing expenses to decide and determine the maximum mortgage amount. They may need additional evidence of contracts or future work to ensure that contractors’ income is likely to remain stable so that they can repay the mortgages.
Lenders generally use various methods to assess the mortgage amount that contractors can afford. But the rationale for calculating them all is the contractors’ affordability to repay them. This section refers to different methods of calculating the contractors’ affordability.
Average Income in Recent Years
Contractors typically have to provide evidence of at least six months of revenue history, but most lenders want to see bank accounts of the last two to three years. For highly experienced contractors, lenders have relied on the average income of recent years to base their assessments. Using this average, lenders calculate how much contractors can repay and, as a result, how much they can repay the mortgage.
Recent Contractors’ Revenues or Minimum Income
If contractors’ incomes fluctuate over the years, they usually do not use this method to calculate their average income. In these cases, they usually consider the current income of the contractors or their lowest income as their average income. In this case, the contractors will probably receive small mortgages or will not be offered reasonable rates and conditions.
Some lenders may use the daily rate as a basis for calculating the average income of contractors. However, many lenders also ask contractors to submit their recent contracts. If lenders use the daily rate as the basis of their calculations, they will multiply the mortgage applicant’s daily rate by the number of days in the week and then throughout the year. They also consider vacations or contract intervals and, therefore, typically base 46 weeks in a year.
Borrowing from Contractor-Friendly Lenders
Some traditional lenders may have old-fashioned attitudes toward the contractors’ affordability. Therefore, contractors should look for lenders who like contractors. However, contractors can more easily find people who better understand working with a mortgage broker. This increases the likelihood that the contractors’ mortgage applications will be accepted. Lenders, for example, take different coefficients into account to calculate the contractors’ affordability. These coefficients start at an average of twice the average annual revenue of contractors. But contractor-friendly lenders charge much higher rates to calculate the amount of mortgages they can pay.
The importance of using AWS Mortgage advisors
AWS Mortgage advisors carefully review applicants’ unique personal and financial needs and circumstances, using services designed specifically for contractors. They also provide their service portfolio in a completely transparent, reliable and impartial manner and help customers choose the most appropriate option from among the various options.
AWS Mortgage advisors also have access to a wide range of lenders and products on the market and have built strong relationships with strong lenders over the years. Based on these relationships, they provide customized products to contractors to meet their needs.