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Contractor Mortgage Deposit - how much will you need?

As a contractor you might wonder whether you will need a bigger deposit to get a mortgage outside permanent employment. That’s not the case, but a good deposit does bring advantages. As specialist brokers we will connect you with some of the most effective mortgage deals.

What is a Contractor Mortgage?

Contractors use the same mortgage products as everyone else. The main difference is that some mortgage lenders have a greater appreciation of how contractors work, have specific criteria and affordability calculations that will help you maximise your borrowing potential. 

Some lenders might see you simply as self-employed or as a limited company director. With a specialist contractor mortgage, you can be assessed on your day rate to potentially borrow more or access better rates.

Do contractors need a bigger deposit?

Having a bigger deposit is a benefit to anyone buying property, as it really opens up your mortgage options. But there’s no reason why a contractor would specifically need a larger deposit, unless you have bad credit.

It’s more important to get good mortgage advice from a specialist who can compare a wide range of deals. That way you will not only make sure you are accepted for the mortgage, but that rates and fees are as competitive as possible.

Why is it better to have a bigger deposit?

While the minimum deposit for a mortgage is currently 5%, there are fewer mortgage products available and they tend to have the highest interest rates. 

5% mortgages are most commonly sought out by First Time Buyers. Once you have a property you can usually add some equity to your deposit. 

The average property deposit is around 10% of the purchase price, but if you can put down 20% or more you will unlock more competitive mortgage rates and get a wider choice of high street and specialist lenders. Once you reach 35% you can access most of the best deals in the marketplace. 

The lender is largely concerned with the risk of each customer. They have to consider what happens if you default on the loan and they have to repossess the property. If the outstanding mortgage on it is only 65% of its value, the lender will be confident of being repaid in full. 

How can I get a deposit together?

Most people save up a deposit by putting money away over a number of years. It’s also possible to be gifted the deposit by a family member. 

Something worth looking into is the Lifetime ISA, a government initiative to help you get on the property ladder. You can save up to £4,000 per year, tax free, and when you’re ready to buy a property the government will add a further 25% to the total, boosting your deposit.

Part of the legal process of getting a mortgage involves checks on your deposit to meet certain guidelines. A solicitor may ask you for evidence of where the money has come from, including bank statements. 

Gifts, savings, investments and proceeds from selling possessions are all legitimate sources for a deposit. Some lenders will allow you to top up the deposit using funds from a loan or credit card, but not all mortgage providers accept that. 

How can a Mortgage Broker help?

As a contractor, securing a mortgage is much simpler if you talk to an experienced mortgage broker. We’re here to advise you on the most suitable mortgage deals and compare criteria, interest rates and fees on your behalf. 

We explore your credit file and run an affordability assessment to decide from our panel of lenders which lender meets your needs – potentially one that will accept your contract rate as your income, for example. We will then support you through the mortgage application phase right up until your mortgage deal completes. 

Mortgages by Mcateer Ltd is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.

Your property may be repossessed if you do not keep up repayments on your mortgage

Approved by The Openwork Partnership on 04/12/2023.