Should Contractors rent or buy?

With interest rates as low as they are, Contractors may be interested to know that you could be paying more on your rent per month than you would be on mortgage repayments if you were to find a competitive mortgage.

You may think that finding a competitive rate as a Contractor would be impossible as banks may not understand the unique nature of your contract income so often Contractors mistakenly choose to rent rather than buy. Rest assured that ContractorFinancials and their specially negotiated Contract based underwriting, can help you secure a competitive mortgage that will fit your needs.

A mortgage to suit your needs

The first step to getting on to the property ladder is to decide what kind of mortgage would suit you best. A first time buyer on a lower contract rate will have different requirements to a first or second time buyer that is earning more so identifying the right mortgage to suit your needs is key to the success of your application. There is a wide range of mortgages available to suit your individual requirements.

Interest only mortgages have long been popular with first time buyers as payments are generally lower because you are only covering the interest costs each month instead of paying back the loan. However, in recent years these have been in decline as too many people found themselves unable to cover the lump sum left at the end of the mortgage term. As a result, interest only mortgages are now few and far between and Contractors must prove that they have an alternative repayment vehicle in place to pay off the mortgage at the end of the term.

The good news is that the rates available on repayment mortgages have come down considerably recently so you can often benefit from the same low monthly repayments but with the peace of mind that you are clearing the mortgage debt each month alongside the interest.

It is possible to combine the two with a split mortgage which carries half of the loan on interest only and half on repayment. This can offer an affordable option to cash strapped first time buyers as the monthly costs will typically be lower than a full repayment mortgage.

A popular option with our clients is an offset mortgage where your debt is linked to your current account so that you only pay interest on the balance between the two. This enables you to lower the interest rates on your mortgage with the money that you hold in your instant access accounts without paying off a large lump sum.

Flexible mortgages are ideal for Contractors because as the name suggests they offer flexibility in repayments, allowing you to overpay when you can and underpay when you need to, fitting in line with your Contract. The interest on this kind of mortgage is calculated daily so you would benefit instantly from any overpayments you make in terms of the interest on your mortgage.

Arrange your mortgage around your lifestyle

It is important that the mortgage you apply for is tailored to your income so that repayments remain affordable. If you need to know what your repayments will be for a fixed period then a fixed rate mortgage would be ideal, this is where the interest on your loan is fixed for a certain period so your repayments remain equal and when this period is up, you can remortgage or move on to your lenders standard variable rate.

Alternatively, tracker rates are linked directly to the Bank of England base rate so you can benefit from any falls in rates but you are also at risk from increases. If you’re concerned about this, you can get a capped rate mortgage which works in the same way as a tracker rate but is capped at an agreed level so your repayments can’t rise above a certain amount, which can be helpful if you are on a tight budget.

Hassle free homeownership

Contractors often worry whether you will find the time when you are on a contract to manage the process of buying your own home but this needn’t be a major concern as the experienced mortgage team at ContractorFinancials can handle the whole process for you. The whole mortgage process will normally take between four to six weeks from your initial phone call to us, which is often quicker than it can take you to find a suitable rental property and finalise the details with the landlord or letting agent.

With their Contractor mortgage service, ContractorFinancials can offer you a quick and hassle free process without you having to visit them for long meetings, leaving you more time to concentrate on your own client. They handle the whole process over the phone, emails and post, unlike lettings agents who will need you to make time to come into their offices to sign paperwork etc.

If you are interested in getting a Contractor mortgage call 0845 062 8888 to speak to a specialist mortgage adviser or email sherwincurrid@contractorfinancials.com

About Sherwin Currid

We are an established professional ACCA practice with years of experience helping Contractors and Freelancers to operate tax efficiently and in a fully compliant way. Contact us today for a free consultation on how to put your affairs in safe hands.

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