Contractors in the UK have more ways of securing a mortgage than ever before. Investing in a property is a sound investment and one that any contractor should make. Our guide on how to apply and secure a mortgage will be discussed.
Traditional Mortgage Lenders
Contractors will mostly find themselves in a lucrative position where they are earning more money which could be put towards a property investment. They are also able to pay the mortgage off in a quicker time scale.
However, high street banks and building societies do not always take your new level of earnings into account. These more traditional banks limit a mortgage according to salary earned. Contractors find themselves in a difficult situation where they have many application details to deal with which often results in a securing a smaller mortgage than hoped for.
The best way to tackle the application process is to shop around before applying. This is wise since each time a credit check is conducted this will in turn affect your credit score. You may also need to apply for various insurance policies during the mortgage application process.
Alternative Mortgage Lenders
Alternative mortgage lenders often specialize in mortgages for contractors. You will be able to secure a larger mortgage especially if applying with a 10% deposit. These specialist mortgage lenders will also do a credit check so only apply if you are sure about a mortgage deal as each application will affect your credit score.
Mortgage brokers are also specialists in securing mortgages for contractors. The most important factor is to find a mortgage broker who is well known and has a good reputation in the contractor market. Also ensure that you are well informed by the mortgage broker as to the mortgage protocols and financial codes of conduct that they will follow to ensure that you are protected.
Choosing a Mortgage
Whether you apply for a mortgage through a traditional bank or with an alternative lender, you will have to decide which type of mortgage you will take out.
A Repayment Mortgage
A Repayment mortgage lets you repay capital and interest to ensure that the full amount will be repaid at the end of the loan. But this type of loan is inflexible in that each monthly payment must be met.
Interest Only Mortgage
The Interest Only Mortgage lets you repay the interest back while repaying the capital amount separately. This type of loan is more flexible.