During that first client consultation where we simply gather the facts to build a picture of what our clients want to do, I find it is always the “What do you do for a living?” question that makes each client individual.
Gone are the days where the majority of clients simply say, “I work 37.5 hours per week on an employed basis”. We are now faced with a catalogue of income sources to consider.
Clients of a contracting nature explain to us how they are paid, and they do so in an apologetic manner. They believe that their occupation will burden them before they have even investigated their options because the word on the street is that “you will never get a Mortgage if you are a Contractor”.
I would like to share some information from within the industry that confronts the myths surrounding mortgages, contractors and other specialist income. Firstly, we are living in a period where employment has never been so flexible. So being paid as a contractor is not a negative factor.
It is simply a sign of the times. Whether you work from week to week as a Labourer with a CIS card or you have signed a 5 year deal to be a potential top Striker for a Premier League football team, you are going to be considered a contractor.
So how are the Lenders reacting to the rise in contracting income? How are they expected to lend money to people who are committed to a zero-hour contract for example? Are lenders really on board with irregular or varying income?
I will be honest, the criteria manuals for each lender can differ substantially. And I have never submitted a Mortgage application for a contractor without contacting the Lender in question’s Business Development Manager first to clarify exactly how the income will be assessed. Generally, the more popular lenders that we come across within our company are receptive to contractor income providing it ticks certain boxes.
The Lenders that are willing to accept applications are mainly looking for consistency in the same field of work and a track record of earnings. For a PAYE employee on a permanent contract we would ask for 3 months payslips to verify income.
However with contractors we are more likely to ask for 6 – 24 months’ worth of proofs including payslips, P60s and copies of contracts. The Lender may seek references or query weeks where no income or a small amount of income was earned.
Although this can seem excessive, especially when a lot of contractors are paid weekly and can send me up to 100 payslips attached to one email, it is proving to the lender that the client has become accustomed to a certain income and also established themselves within a contracting environment.
And rightly so, the Lenders do appreciate this and providing the remaining criteria is met surrounding the Mortgage application, the client will be successful in their application and buy their new home.
Contracting income applications have certainly become a topic of conversation with Mortgage professionals and some of my favourite ‘success stories’ have derived from quirky income applications that on face value I have had a doubt or two in mind but the right Lender has accepted the application, used some common sense underwriting and provided the Mortgage.
The Lenders must adapt to their applicants if they want to succeed and stay relevant within their industry. And I know that we persistently ask Lenders to make changes to their policies to suit our client’s needs.
The Mortgage industry can never stay still. There is always a new line of income, a new property type or a new ‘something else’ that we need Lenders to consider. And this will always continue.
Guest blog for JustAccounts by Rachel Cummings, Mortgage Adviser and Office Manager
Mortgage Xperts, Liverpool