Icon Accounting sat down with Robert Whelan BComm, QFA of Rockwell Financial Management to get his advice on Contractors applying for mortgages.
As Robert is very familiar with the contracting space and with his expertise on all things financial, he proves to be a valuable link for both banks and Contractors alike.
Roberts outlined his 5 Top Tips for Contractors considering applying for mortgages so that they can improve their chances of approval by using some simple strategies.
1: Avoid lengthy breaks between contracts:
One of the perks of contracting is that you have the opportunity to take breaks between contracts for holidays, family time etc.
Whilst most lenders are happy to consider Contractors when there has been at least 12 months of continuous contract work and no more than 8 weeks between contracts, most will require 2 years accounts when deciding as to how much you can borrow.
Lengthy breaks between contracts may hinder your application and too many gaps in your employment may be questioned.
2: Maintain a good credit rating and demonstrate good financial management:
It is essential that you have a good credit rating in order to secure a mortgage.
Any loan and credit cards repayments should be paid on time as any missed payments could result in your application being declined.
Lenders will also need to see that you have a consistent savings record.
The bigger the deposit you have saved, the better your chances of getting approval.
As a Contractor, you will generally be on a higher rate than a comparable permanent employee which can make it easier to save more towards your deposit.
3: Find a broker who understands Contracting:
Over the last number of years, lenders have become more cautious and Contractors have found it difficult due to a lack of understanding of their work.
It is recommended that Contractors find a mortgage broker that specialises in contractor mortgages.
Many banks are unsure of how to deal with Contractors as they don’t fit the standard criteria.
4: Be Realistic:
The Central Bank limit on borrowing is 3.5 times your gross income. In some cases, you can apply for an exemption which will allow you to borrow in excess of this limit.
You will need to be realistic about the monthly repayments you can afford to make. It is important to remember that interest rates may go up and you should concentrate on how much you can afford rather than how much you can borrow.
5: Have all the required Documents:
If you are self-employed you will need to provide at least 2 years of certified accounts. Icon can provide written confirmation of your employment and confirm your tax affairs are in order.
If you would like to discuss any of the above points further or would like to learn more about the services Rockwell Financial offer, please visit their website or contact the Icon Team and we will gladly arrange this for you.
Rockwell Financial Management , Unit A4, Nutgrove Office Park, Nutgrove Ave, Rathfarnham, Dublin 14
Tel: 01 2966120