Although there is numerous financial institution offering mortgage, finding the best mortgage can be hectic. For contractors, obtaining a mortgage is even harder because lenders always misunderstood contractors’ work and remuneration. In most cases, lenders base contractor mortgages on their accounts. This may not reflect their earnings, lowering the amount that they can lend to the contractor.
What beginner’s need to know about contractor mortgage
What financial institutions do
Most banks and Sacco’s considers the amount of risk before lending and contractors always seem to be risky. Lenders worry that the contractor will have to struggle to afford the monthly payment once the contract end. For a contractor to secure funding from a lender, it is important to seek assistance from a specialist broker.
Brokers understand how to present the case in such as way that the lender will look at the borrower’s case as less risky. While presenting your case, you need to tackle with the following two problems:
- Proving your full consistent income is the best way to support the level of funding required.
- Proving that you will be able to have income even after the contract end and you will be able to pay the monthly payment is very important.
How to tackle the problem:
You may have to seek assistant from an experienced mortgage broker to help you through the process as they have work with most of the lenders and understands what most of the financial institution requires. Brokers have developed bespoke that ensure that your income is assessed based on your various income. Brokers use various documentations such as your current contract and up-to-date copy of your CV to avoid issues with affordability.
What determines the amount of loan a contractor can borrow?
Financial institutions consider different factors before lending their money. Here are some of the considerations that they may before lending the money to a contractor:
- The type of client: lenders consider whether you are the first time buyer or a frequent client. Lenders will consider you consistent income and outgoings you have. You need to provide enough documentation to prove that you are a responsible borrower.
- The type of mortgage you are looking for: there are numerous products to choose from with each of them having different interest rates and flexibility. The type of mortgage product determines the interest rates, fees, and flexibility.
While borrowing mortgage, you have to consider various cost involve such as arrangement fees, valuation fees, legal fees, broker fees and stamp duty.