Contractor Mortgage application: Getting the numbers to add up

Man under a pile of boxes stacked around his head
Published on 21 July 2023

When you find your dream home, getting a mortgage can sometimes seem difficult, especially if your income isn’t the usual monthly salary. For example, if you’re self-employed, operating a limited company or a contractor, a “standard” mortgage application might not give you the amount you require to borrow. Approaching high street lenders direct will often mean you have to provide strict evidence of income. This can be difficult especially if you are self-employed. So, working with a mortgage broker can help overcome these difficulties and find a contractor mortgage that will meet all your needs.

At 177 Mortgages we have developed great relationships with a wide range of lenders. So, if you are self-employed and looking for a contractor mortgage to purchase your new home, a mortgage broker can help you overcome these difficulties. Take a look at how we recently helped a customer with their home purchase.

Client: Mr M owns a limited company and works for the company as a day-rate contractor. He owns the limited company 50/50 with his wife for improved tax efficiency. He had found his dream home and wanted to purchase the property.

Scenario: Mr M had been to see a local mortgage broker that didn’t understand limited company accounts or day rate contractor contracts. Because of this, the other firm lacked the knowledge to complete a mortgage for a self-employed contractor. Luckily because he was so determined to purchase the property, he decided to try a wider search and came across 177 Mortgages. He read the reviews from other self-employed mortgage applicants and decide to give us a call.

Challenge: The limited company was used to pay all costs – the company cars, phones, utilities, and expenses, to reduce tax liabilities. He had been told, incorrectly that all lenders will only work from his share of the net profit (in his case 50%) plus any basic salary he took from the company. Using this “share of profit plus salary” method to calculate the maximum amount that he could borrow, left him significantly short of the amount required to purchase the new home. This even resulted in a declined application with one lender through the other broker. He required a lender that would consider the gross figure from his day rate contract.

Solution: After the client called 177 Mortgages, one of our advisors, who are all trained to read company accounts, immediately picked up his case. They completed a full fact find over the telephone at a time that suited Mr M. Because of this training, all our advisors know which figures can be used, which figures can be added back into the application, and most importantly how to present this kind of application to mortgage underwriters for the best outcome for the client. There are two possible ways to approach a contractor mortgage application like this, using the figures from the limited company or the day rate contractor amount. Using this information, we were able to approach several lenders that will only use the gross day rate amount for the mortgage application. This made a significant increase to the maximum amount that he was able to borrow. The lender was also able to offer the client a fixed-rate mortgage at the best rates available on the market.

Outcome: Using our expert knowledge of contractor mortgages and the existing relationship with the lender, we were able to secure the client a mortgage deal that met their requirements. We were able to maximise his borrowing capacity, which also allowed him to keep some of the money to complete renovation work on his new home.

Using 177 Mortgages to find you help you complete a mortgage application as a sole trader, self-employed individual or day rate contractor is fee-free. All our advisors are trained to understand company accounts and are experts at completing contractor mortgage applications. So if you’ve been turned down by a lender because you are self-employed or have received poor advice from a broker that has struggled to build an application using your company accounts – get in touch with us today.

177 Mortgages and 177 Protect are open 7 days a week. We’re always happy to talk through your mortgage, specialist finance and protection needs in more detail. If you’d like to book an appointment or simply find out more information, please get in touch.

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