Just like salaried employees, contractors too can access mortgages and enjoy handsome rates but only if they can get advice from expert brokers and advisors. There has been a notion that contractors barely have a regular income hence they get locked from mortgages. Our long working relationship with different mortgage companies and renowned lenders has made it a dream-come-true for many contractors across the UK because they’ve been able to access the elusive investments through tailor-made customer products facilitated by us.
A mortgage is simply a loan given out to an investor to fund property purchase, to be repaid over a long term. For the purposes of making a home a permanent residence, this will be classified as a residential mortgage but there are other options as well, such as buy-to-let. Mortgages are more or less like ordinary loans save for some features that differentiate them. They include;
- Term of loan repayment
- Amount of interest to be paid
- Mode of interest payment
- Property used to secure the loan
Considering contractors for mortgages
Things have changed and contractors no longer need to provide banking details spanning over 3 years, or go through a costly process of getting certified so they could decide how much they are legible to borrow. Emphasis is now based on the real valuation of contracts held by contractors to determine the size of mortgages they can avail.
Contractors however have been warned against irregular lenders who present themselves with questionable deals. These lenders and some other fishy mortgage brokers barely understand what goes around in businesses of contracting and probably they will not bring to book essentials of mortgage for contractors.
Primarily mortgage repayment is carried out in two major ways; repayment and interest-only mortgages.
Through repayment mortgage, contractors get to borrow capital to buy homes or other valuable properties and immediately commit to repaying their debts. Normally there is an amount of monthly interest charged, as well as an amount meant to repay principal. The best part about repayment mortgage is that repayment of initial principal is effected from the first day, and even though monthly payments are bigger than in interest-only mortgages, the loan period can be spanned over a longer period to ease the pressure of payment.
If you are a first-time buyer, this is certainly the ideal kind of mortgage for you because it offers contractors lower monthly payments. However to be on the safe side another investment alongside this loan is advised because monthly payments will only take care of interest, leaving capital unpaid. This investment is supposed to pay for the initial capital without leaving contractors in negative financial situations.
Property ownership presents one of the most lucrative investments for any contractor. It comes as no surprise that most of these contractors include it as a priority when planning for their future. Our aim is hereby to give readers an insight of what goes around in this field.
Securing a mortgage is in most cases one of the biggest decisions you will ever make in your entire life and therefore you cannot stand to watch anything go wrong. You need to acquire the services of a good mortgage broker who will help you through the entire process. However, you should be very keen on who you choose as your broker because a slight mistake can lead you to huge losses or unnecessary expenditure. Try to establish how experienced your side kick is in respective matters before you get your feet on the ground. Most importantly, let you broker be conscious about the code of conduct of the property market so you may receive the kind of service you will get to enjoy for a lifetime.
Choosing the method of repayment
Mortgages come in 3 main types;
Repayment: – This is also known as Capital and Interest Mortgage (C&I) whereby the amount of debt keeps reducing for the entire loan period. This kind of mortgage is non flexible in the event that you’re moving property in the first years because there will not be too much debt to be repaid in the initial stages. What makes the cut in such a situation is the guarantee that your loan will be repaid regardless of the performance of your investments.
Interest only: – You also have the option to honor paying the interest only, and let the loan be repaid through another investment facilitated by the mortgage. It can be an Individual Savings Account (ISA) or a plan that has been commissioned to generate income and hence profits which will effortlessly be used to repay your loan. With this kind of plan, you are free to make regular adjustments on the amount of payments you make over time, and you can choose to take your investment to a different party annually.
Pension Mortgage: – In this case, you stand to be exempted from tax payments on your retirement contribution and you can opt to take a huge amount of your pension (lump sum) to pay off your loan. In such a scenario you stand to gain a larger pension from the government considering the concealed behavior of your credit, making it easier to offset your loan.
Looking for a suitable lender
Looking for a lender is a very crucial part of mortgage acquisition and therefore you should be able to seek the services of a versed financial advisor to help you assess available and suitable options. To make the whole process favorable for you, be so keen on the mode of mortgage interest calculation adopted by your prospective lender. If calculation is done on a monthly basis it might benefit you more than it would the financial institution as opposed to annual calculation that ends up pinning borrowers.