Contractor Buy to Let Mortgage
- A team of down to earth mortgage advisers
- Working for you to find the right lender from a huge panel
- Designed to save you time (and a few headaches!)
Get in touch for an initial fee free, no-obligation chat with an adviser about the most suitable mortgage option for you.
The Financial Conduct Authority does not regulate some Buy to Let Mortgages.
Your property may be repossessed if you do not keep up with your mortgage repayments.
Contractor Buy to Let Mortgage
Anthony talks through the Buy to Let mortgage process for contractors.
Podcast approved by The Openwork Partnership on 30/08/2024
Can I get a Buy to Let mortgage as a contractor?
Yes, of course you could. The only difference for a contractor is in how we use your income when you’re looking at a Buy to Let.
How does a Buy to Let mortgage for contractors work?
With regards to the property, the rental income needs to cover a certain amount over the mortgage payment. The lenders’ criteria is pretty much the same, but the main difference for contractors is how they assess your income.
For example, some fixed-term contractors may be paid a daily rate, for example, £400 a day, and lenders will assess that differently. Some will look at the day rate and multiply that by five to figure out what you earn for the week and then by 46 for your annual income.
Other lenders out there will use your tax calculations and tax year overviews to see what your profit has been for the year and go off that.
Why should contractors invest in Buy to Let properties? What are the pros and cons?
A lot of contractors, especially if you’re on a big IT contract, tend to get paid larger salaries. One of the benefits of investing in Buy to Let is that although properties could go up and down in price, over the long run it could be a good use of your capital.
You could take advantage of the capital appreciation – and on top of that you’re also generating an extra bit of income each month.
If you’re a high earning contractor on a fixed-term contract, at some point that contract will come to an end. A Buy to Let could be a way to put away all the money you’ve earned and look after yourself later in life. You gain from the capital appreciation on the property and also the cash flow that’s been generated.
How will lenders assess my income for a Buy to Let mortgage as a contractor? What documents do I need to provide?
There are variances to this, but as a general rule, most lenders will want to see the contract itself to confirm your daily rate. From that they would calculate how much you earn for the year.
If you are in the construction industry scheme as a CIS contractor, they would want to see the last three months’ payslips.
Other lenders out there may want to just look at the last six months’ bank statements to see how much money’s gone in – they would just calculate your income based on that.
Speak to an expert
Our highly experienced Advisers are ready to help you with either buying or remortgaging a home, protecting your property and lifestyle along with saving you time and effort, ensuring you have a competitive deal right for you.
Should I Buy to Let as an individual or through a limited company?
We can’t give advice on this, but both have their pros and cons. Buying in your own personal name, if you’re already a higher rate taxpayer, could put you in a position where you might be paying 40% tax on all of the income rather than just the profit.
If you’re buying in your personal name, you can’t offset the mortgage payments as an expense, so you pay tax on the full amount. However, the interest rates are substantially cheaper compared with buying under a limited company.
If you buy under a limited company, although the interest rates and product fees are higher, you only pay tax on the profits of the business. You could also put the mortgage payments through as an expense.
We’re not experts on tax, so we always advise you to speak to an accountant. Depending on your own personal income and situation, buying in your personal name or as a limited company may have different benefits for you.
How does remortgaging a Buy to Let property as a contractor work?
With regards to assessing the income, it’s exactly the same as if you’re buying a new property. Our advice if you’re looking at remortgaging a Buy to Let is to start six months in advance.
You don’t want to apply for a mortgage with a very short timeframe left to get it over the line. If for whatever reason, the first lender isn’t happy, you wouldn’t have much time to look at other options before you go onto the standard variable rate.
As with all mortgages, it’s just a case of being prepared upfront.
Can I get a Buy to Let mortgage as a contractor if I have bad credit?
Yes you could, but it does limit your options. A lot of the bad credit lenders will still lend to you on a Buy to Let, but the rates may be substantially higher.
If your credit’s bad now, but you’ve got a mortgage already that you’ve been paying on time, that will help. When you go to remortgage, as long as everything’s improved, you can move back to a standard lender with no bad credit rate increases on top.
How do I apply for a Buy to Let mortgage as a contractor? How long does this process take?
Again it’s the same as all other mortgages. We advise speaking to a broker before you go out looking at properties.
A lot of lenders out there won’t have the experience to grasp the complexity of a fixed term contract. Some lenders just aren’t happy with it. So our advice is to get started long in advance.
Make sure you’re speaking to a broker with a full understanding of how this works. We’ve seen in the past that clients are told they can’t get a mortgage, but in fact they could. it’s just that a broker with no experience in the contractor space has given them incorrect information.
What else do we need to know about getting a Buy to Let mortgage as a contractor?
It’s just a case of making sure you’ve got full proof of your income and showing that you have a contract in place, confirming how much the contract is worth for you over that period.
Also, it really helps to speak to a broker way in advance, to make sure everything’s lined up. That will prevent you from looking at properties that you think would be an amazing investment, only to find you can’t get the required mortgage at that point.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
MOST BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
HM REVENUE AND CUSTOMS PRACTISE AND THE LAW RELATING TO TAXATION ARE COMPLEX AND SUBJECT TO INDIVIDUAL CIRCUMSTANCES AND CHANGES WHICH CANNOT BE FORESEEN.
Approved by The Openwork Partnership on 30/08/2024
Your home may be repossessed if you do not keep up with your mortgage repayments.
