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Are there mortgages for work at home contractors?

13 May 2019 No Comment


Imagine you are a work-at-home mum who makes a living as a freelance writer. The nature of your work legally defines you as a contractor, although the designation is a mere formality. Now you are wondering if what you do for a living could possibly prevent you from getting a mortgage. Well, worry no more. There are mortgages available for work-at-home contractors of all kinds.

Getting a mortgage as a contractor does require a bit more effort. However, one of the benefits of being an independent contractor is having a bit more flexibility in your schedule. You can devote time to the mortgage process as needed without needing to go through the hassles of going to a supervisor and arranging for time off.

Proving Your Income as a Contractor

Functionally speaking, mortgages for work-at-home contractors are not much different than mortgages given to traditional employees. The only real difference is that contractors have to look at different ways to prove their income. As a work-at-home contractor, it is not like you can contact an employer and get a complete history of your earnings.

What you do and how you are paid will largely determine how you prove your income. There are two possibilities that cover most scenarios:

1. Daily Rate Pay

Some work-at-home contractors do work on long-term contracts that define pay as a daily rate. So let’s say you have five different clients from whom you are paid a daily pay rate of £100. You don’t work for every client every day, but you still get paid the same flat rate for every day you do work.

You can prove your income by showing copies of those contracts to the lender. The lender will then require documentation proving how many days you are contracted to work for each employer in a given year. Your day rate will be multiplied by each project and working day for each employer. All of the resulting numbers will be added together to determine your annual pay.

2. Per Job Pay

Perhaps your work dictates that you do not take on long-term contracts. Instead, you work job-by-job. Now you will have to demonstrate your income in some other way. The most common method is to furnish lenders with a copy of your self-assessment tax return for the previous year.

If you haven’t been in business that long, copies of all your invoices along with your updated balance sheet will do the trick. The lender might ask to see copies of your bank statements just to verify the cash you have coming in and going out.

Use a Mortgage Broker

The nature of contract work says to high street banks that you might be a higher risk compared to an employed worker. That means you might be subject to higher interest rates and less favourable terms. Do not settle for that. Instead, go to a mortgage broker to obtain your loan.

As a work-at-home contractor, you should not be required to settle for a second-tier mortgage just because of the nature of your work. You don’t have to when you work through a broker. A mortgage broker is the most qualified person to give you access to very good deals that are unavailable through banks. And because mortgage brokers are also financial advisers, a good broker can help you devise a plan for buying a house within your budget.

Don’t Forget the Total Cost of Borrowing

One last thing you should be aware of is a principle known as the ‘total cost of borrowing’. A lot of people fail to consider this when house shopping. But as a self-employed contractor, you should have a better idea of how finances work. Your knowledge of business helps you understand that there is more to purchasing than simply the listed price.

When you are seeking a mortgage, you start with the principal amount you borrow plus interest. Then you have to add in all of the fees and charges assessed by the lender. If you are required to carry mortgage insurance, that also adds to the total cost of borrowing.

Mortgages for work-at-home contractors are out there. Your best bet is to find one through an experienced mortgage broker.

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