Applying for a mortgage as a Contractor can be an extensive and difficult process. Some key points will be discussed to help you apply for a mortgage which is the best investment any Contractor can make.
Your Financial Position
Contractors tend to make larger amounts of income which essentially makes investing in a property a sound investment. Your strengthened financial position could allow you to apply to buy a larger property or even buy a second property which could be rented. Your higher income gives you a advantageous position to repay your mortgage back quickly.
Securing a Large Mortgage
When applying to buy a property, you will often not succeed in getting a large enough mortgage to buy the property you want. High street banks and building societies normally base the mortgage amount on your salary. But the nature of contracting is not suited to this type of assessment and it is often difficult for contractors to successfully show their worth.
When a credit check is carried out by a loan provider on application, this check will show up on your credit record. Ultimately, every time a credit check is carried out, your credit score suffers. Hence, it is advisable to ascertain that you are happy with the mortgage you are going to apply for before you apply and risk jeopardizing your credit score.
Specialist Mortgage Lenders
Specialist mortgage lenders could assist you in securing a larger mortgage. These alternative mortgage lenders normally specialize in securing mortgages for contractors and may lend you much larger amounts. However, the same applies as with any mortgage, that a 10% deposit will secure you the best mortgage deals.
It is advisable to ensure that the mortgage broker you choose has a good reputation. Also ensure that they are specialists in contractor mortgages to help you secure a mortgage that is based on your type of income. Another consideration, is to establish the protocols and financial code of conduct that they follow to ensure that you are covered in any eventuality.
Choosing a Mortgage Type
The two types of mortgages that you may wish to examine are the Repayment Mortgage and the Interest only Mortgage. Their structures are different and are advantageous depending on your financial needs.
Repayment mortgages permits you to repay the capital and interest decreasing the amount owed over the period of the loan as well as guaranteeing that the full amount will be repaid at the end of the loan. Note though that it has an inflexible structure.
Interest Only Mortgages
Interest Only Mortgages permit you to pay the interest and the loan amount separately. This mortgage has greater flexibility.