The number of freelance or contract workers employed in financial hubs like the City of London is rising , while the number of employees with zero hours contracts rose by 20% in 2015 , illustrating the shift in how workers and companies view employment now and in the future.
In the mortgage market, where lenders were previously hesitant to lend to self-employed people, some have now recognised this shift and are changing policies accordingly.
If you’re a contractor, self-employed or combine a part time job with self-employed or contractor work, speak to John Charcol, as we have access to mortgages designed specifically for you.
Naturally, some contractors will have more steady income streams than others, and while regular mortgage products may be suitable, there are other options that might be a better fit with less regular income patterns or where bonuses and lump sum payments are commonplace.
Here are examples of mortgages that may suit contractors:
These deals work by ‘offsetting’ your savings against what you owe on your mortgage, therefore reducing the overall amount of interest you pay.
So, if you have a £100,000 mortgage and £20,000 in savings with the same institution, with an offset you’d only pay interest on the £80,000 difference, which means you may be able to pay down your mortgage more quickly. The downside is that you don’t earn interest on your savings at this time.
These can be advantageous for people likely to earn bonuses or regular high value contracts who wish to minimise interest charged.
A flexible mortgage is just a normal mortgage, but with special flexible features bolted on. The features and how they work will differ between providers so it's important when you're searching for a mortgage to find one that has the facilities you need.
For example, you might have interest calculated daily (cheaper than interest calculated annually or monthly), repayment holidays, unlimited overpayments or droplock – where you can move to a fixed rate deal with no financial penalty.
Because underwriting for contractors now more closely resembles that of ordinary residential mortgages, some lenders now accept one year’s trading history and will consider retained profit for limited companies, instead of just salary and dividends.