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The best ways to get mortgage when working as a contractor or a freelancer

By Edited Nov 13, 2013 0 0

Contractor Mortgage

Working as a contractor has its own charm but it has its downsides as well. You will not have an employment, which will keep you away from certain rights and facilities. You will not be able to convince the lenders easily when it comes to loans and mortgages. Since lenders usually see the status of your job to know if you can repay the loan, self-employed contractors will have no mean of convincing such lenders.

However, when it comes to mortgage loan, things have changed incredibly over the past few years. Now it is easy for every contractor to apply for mortgage loan. Even the new contractors can get the mortgage loan just like the others. You just have to know the process.

In order to get the best mortgage, you have to select the best broker. It will not only avoid the hassle of dealing with underwriters but will also speed up the process. Most underwriters are not aware of contracting market and this usually creates a problem.

In order to calculate the amount you can borrow through a mortgage loan, you will have to use a mortgage calculator. Usually, these calculators are available freely on the internet. Just find a good contracting website and you will find the contractor calculator somewhere on the main page.

Contractor mortgage options

Although contractors have the access to similar mortgages and rates like salaried employees but they will have to find a specialized broker and financial advisor.  If you hire a financial advisor, you can easily leave the rest to him. Financial advisors specializing in advising contractors will know different lenders for mortgage loan. They will also know how to work with them to get you the best possible rates.

When it comes to picking the right kind of mortgage loan, you will have two options to choose

1-      Repayment mortgages

2-      Interest-only mortgages

Repayment mortgages are common. You will borrow the capital and start paying off your mortgage from the day one. Your monthly repayments will include part of original capital as well as monthly interest. Even that these repayments are usually higher than interest-only mortgages, repayment mortgage is still a better option as long as you have the ability to make monthly repayment. You can also increase the repayment period to decrease the monthly repayments but you will be paying more money to the lender in the long term.

Interest-only mortgages offer low monthly payments but it only covers the interest as you will not pay anything from the principle amount borrowed. The original capital sum will stay the same despite making payments for years.

If your investment can generate enough income to pay off the capital sum in the future, then interest-only mortgages are a good option. Usually, contractors seek these mortgages when they want to invest the money on some financial product or investment vehicle.

Mortgage tips for contractors

Contractors can make the mortgage process easy once they know the direction. Here are some tips to help you with it.

-          Hire a contractor mortgage specialist: If you are looking to make things easy, consider hiring a contractor mortgage specialist. Since most bank staff is unaware of contracting world, they will have problem communicating with you and understanding your needs. A contractor mortgage specialist will understand all these things making sure that you get the best deals from mortgage brokers.

-          Make a 10% deposit: If you make a 10% to 25% deposit, you will find even better deals and rates from mortgage lenders. Try to save money before you get a mortgage. This way you will have necessary money to pay the maximum amount upfront.

-          A shiny credit rating makes it all easy: Try to maintain a good credit rating to make everything easy and simple. With shiny credit score, you will easily find willing lenders and low rates.



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