Mortgage Options for Contractors Improve as Lenders Relax Criteria

While mortgage rates continue to fall as lenders remain confident about the prospects for the economy, the pandemic has undoubtedly made it harder for certain groups to borrow money. The self-employed and contractors have found lenders scrutinize their income more carefully, with many tightening criteria for those who are not employed, even if their businesses have been relatively unaffected by Covid. Where applicants have accepted government support during the pandemic, via the self-employed income support scheme (SEISS) grant, some lenders have refused to lend to them.

The good news is that the situation is improving with several lenders easing their criteria as far as the self-employed are concerned. HSBC will no longer ask self-employed applicants to provide bank statements from the first three months of 2020 – it previously requested this information to compare how businesses were performing before the pandemic to their trading levels now. Instead, HSBC will now ask for just the latest three months’ bank statements and two years of accounts.

TSB has increased its loan-to-income (LTI) multiple from 4.25 to 4.49 times income, although if a borrower received a SEISS grant in the 2020/2021 tax year, this would be subtracted from overall income. Nat West will accept applications from borrowers who have taken a SEISS grant as long as it wasn’t in the last three months. Santander has changed its lending policy to exclude the 2020/21 tax year for self-employed borrowers who have suffered an out of the ordinary loss of earnings.

While it is good news for the self-employed that mortgage criteria are easing, this is not the case across the board with lenders all approaching contractors in different ways. It is therefore important to seek advice from a whole-of-market broker who specialists in this market, such as AWS Private Finance. We know which lenders are most sympathetic towards contractors and offer preferential terms. We can help you find the right deal for your circumstances at a competitive rate.

Day-rate contractors who are seeking a large mortgage will find their choices are even more restricted so advice is more important than ever. Do get in touch for more information.
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