Contractor Mortgages with a gap in employment
Get in touch
Can Employment Gaps Affect A Contractor Mortgage Application
As a contractor, one of the biggest risks you face is the length of the gaps between your work engagements. When you’re looking to get a mortgage, you might be worried about what a mortgage lender will think about these gaps in income.
What is acceptable for a Contractor mortgage gap in employment?
The longer you have been a contractor, the less it matters how long your gaps in employment are. When assessing you for a mortgage deal, a lender is more interested in your annual income than the pay you receive month to month.
Mortgage companies want to be comfortable that you will be able to meet the repayments on your mortgage. So you need to demonstrate that you can comfortably manage through any gaps between contracts.
When you apply for mortgage products, the lender will either assess you on your contract day rate or your annual accounts. The contract rate route generally looks at your gross contract value. This is a popular approach for contractors that are First Time Buyers.
The lender will often seek continuous employment of 12 months or more, with six months left on the current contract.
Some mortgage companies do state that the maximum gap between contracts is six weeks, while others might accept up to 12 weeks.
Are there other routes for Contractors who have gaps between contracts?
If a mortgage lender advises you that the gaps in your contracting history are too big, it won’t necessarily prevent you from getting a mortgage. There are still other ways to prove your income.
For example, you could find a lender that considers you as self-employed. This usually involves demonstrating your income via your tax return or annual accounts.
What documents do I need to prove my contracting income?
Usually, mortgage lenders will ask to see your self-assessment tax calculations for at least the last two years. These states the income on which you’re paying tax and is called the SA302 form. You will probably also need to supply the accompanying tax return (SA100). You should be able to download these from the HMRC website. You are now departing from the regulatory site of Mint Mortgages And Protection Limited. Neither Mint Mortgages And Protection Limited or PRIMIS Mortgage Network is responsible for the accuracy of the information contained within the linked site
You might also be asked for the last few business bank statements to confirm that your company is in good financial health.
Can Contractors show annual accounts instead?
If your business is set up as a limited company a mortgage lender should assess you based on recent years of accounts. These will need to be certified by an accountant, and should state the salary you are paid and your dividend income.
Most lenders will look for at least two years’ self-employment records in order to make a mortgage offer. Some will accept also one year’s records, but these will need to demonstrate good business performance.
Will lenders accept contract gaps in exceptional circumstances?
If you’re in an unusual situation as a contractor, you might be able to get a mortgage by explaining the circumstances to a sympathetic lender.
An example might be where you have built a successful contracting career but have been on parental leave for a year, or perhaps medical issues have affected your ability to work.
In this sort of situation it’s worth seeking out mortgage advice, to gain recommendations about lenders that might offer you competitive deals and interest rates, despite the gap in contracts.
How does a gap in employment affect a Contractor’s Buy to Let mortgage application?
If you’re looking to buy a property to let, lenders are likely to assess you as self-employed. Sole trader and limited company contractors will be asked to supply tax records and company accounts. A gap between contracts will only be an issue, then, if it means that your overall earnings for the most recent year are significantly lower than usual.
Generally, a lender will offer you four times your income to buy a property. As always, you should carefully consider your financial position and not over-commit yourself. If you’re unable to keep up with the mortgage payments, your home may be repossessed.
Where can I get more information on contractor mortgages?
Contracting is an area where there are some unique aspects to securing a mortgage. It pays to seek advice from the experts in finding a good deal. An experienced Mortgage Broker will know which lenders look most favourably on contractors and how to find the most competitive mortgage rates.
We have a great deal of experience in helping contractors find suitable products that suit their circumstances. Our friendly team is on hand to help with your query.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
We may charge a fee of up to £395 for mortgage advisory services and administration.