Thursday 24 November 2016

Is being self employed the same as a contractor when it comes to getting a mortgage?

Author: Editorial Team

A contract being signed

When it comes to getting a mortgage, the devil is in the detail. A wide range of factors can affect the amount you can borrow, and even the smallest alterations in the level or type of your income can have an impact on how the banks view your eligibility.

This is particularly true if you have a non-standard income. If you’re self-employed, receive the bulk of your money via overtime and bonuses or contract your services out to third parties, you need to make sure you do your research before applying for a mortgage to ensure you get the best deal possible.

What is the difference between a contractor and being self-employed?

Most self-employed people will either own their own business or provide freelance services for a number of different clients at once. However, there are others who are tied to a single employer, via a contract, for a certain period of time. These contractors and subcontractors often work on a series of fixed term contracts, with employment periods lasting anywhere from a few weeks to a few years.

Though technically self-employed, these contracted workers often enjoy some of the benefits that come with being on a full time salary. From holiday pay and sick pay to overtime and bonuses, contractors can have more in common with company employees than with their fellow freelance workers.

House keys in the doorGetting a mortgage as a contractor

As @o2businessUK says: “Working for yourself has never been so attractive. 4.6 million people in the UK are currently self-employed, accounting for 15% of the workforce”. However, when trying to get a mortgage as a self-employed person, you can still come up against a lot of obstacles, with many banks reluctant to lend to buyers without a full time employer.

Getting a mortgage as a contractor can be a very different process to getting a mortgage as a self-employed person. If you have a long history of contracted work and can prove your contracts are regularly renewed or extended, banks will generally be more inclined to lend you money.

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Written by: Editorial Team