With work now untethered from place, and with family ties brought into sharper focus, you may well be considering your plans for a move, and therefore a mortgage. First time Contractors often fear that taking a contract role means giving up the chance to obtain a mortgage.
Thankfully, that is just not true. In fact, you may be in a position to borrow more as a Professional Contractor, as your income is likely to be greater than that of a permanent employee.
As part of our recent #AskTheExpert series, Robert Whelan BComm, QFA of Rockwell Financial Management outlined universal criteria for obtaining a mortgage and the most common Contractor questions on mortgages.
Read on for a synopsis of what was discussed, as well as a look at how Icon Accounting can help you on your mortgage journey.
Universal Criteria for Getting a Mortgage
The standard benchmarks for permanent employees also apply to Contractors:
- Loan to Income
- Repayment Capacity – Everyone is familiar with the struggle of saving for a deposit, but did you know that your behaviour over the past six months can make or break your mortgage application? Demonstrate that you can meet the mortgage repayment you are likely to have by showing evidence of your ability to pay rent/save to the same amount.
- Credit History – Access a forensic analysis of your own credit history, otherwise known as a Consumer Credit Report here.
Did you know that 10% of all mortgage applications can get an exception to rules such as loan to income, deposit, or net disposable income (mortgage repayments cannot exceed a percentage of your net disposable income – typically 40-45%).
When starting your mortgage journey, be aware of the Central Bank rules on mortgages, and if you are looking for an exception, be exceptional.
For example, if your bank has requested proof of repayment capacity and you wish to be granted an exception on your loan to income, show a larger repayment capacity than asked.
Click here to read Robert’s Top Tips for Contractor Mortgages (the do’s and don’ts to be aware of).
Most Common Contractor Questions on Mortgages
- How long do I need to be contracting before I can apply for a mortgage?
Typically, contractors could apply for a mortgage after 12 months in contract, which would demonstrate a continuity of career. However, post-Covid, the banks may be more reticent to consider an application of under two years. This is sector dependent.
- Will I need a bigger deposit as a contractor/Will I be considered higher risk?
No, certainly not.
- What happens if I leave contracting/How long do I have to wait to apply?
Typically, I would advise ex-contractors to wait until they have been in a PAYE/Permanent position for six months.
- What’s changed post-Covid?
Post-Covid, we have seen turnaround times slow somewhat. We have also noticed a greater scrutiny placed on the sector that a contractor is operating within.
How Icon Accounting can help you on your Mortgage Journey
If you are an Icon client who is applying for a mortgage, we can provide the following
- Certificates of Salary
- Three to six-month payslips
- Letter confirming that taxes are up to date
- Tax Clearance Cert
- Copy of previous three years of tax returns
- Financial statements for your limited/umbrella company
- Bank statements for your limited company
If you have any questions about Contracting, the advisory team would be glad to field your questions. You can get in touch here.
If you are already an Icon client, and have any questions on mortgages, reach out to your Account Manager. If you would like to speak directly to a Mortgage expert, contact 01 2966120 or visit www.rockwellfinancial.ie