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Halifax has long been a market leader for contractors, pioneering the approach of using a contractor’s day rate to determine income rather than requiring two years of tax returns or accounts. Initially opening up the marketplace to IT contractors, Halifax has since broadened its criteria to include all types of contractors.
At Strive Mortgages, we specialise in mortgages for contractors of all types. We offer whole-of-market advice and have built long-standing relationships with both mainstream and specialist contract lenders. We understand the nuances that different employment setups present, ensuring we find the best mortgage solutions for your unique circumstances.
Reasons to use Halifax for a contractor mortgage
Halifax’s tailored approach to contractor mortgages, considering the unique income structures and employment patterns of contractors, makes them an attractive option for securing a mortgage with favourable terms. Using Halifax for a contractor mortgage offers several advantages:
- Lend Based on Gross Annual Contract Value: Halifax calculates borrowing amounts based on the gross annual contract value, using the annualised day rate. This method often results in higher borrowing limits compared to traditional salary-based calculations.
- Relaxed Criteria on Minimum Contract Terms: Especially beneficial for IT contractors or high-value contractors, Halifax has more flexible criteria for minimum contract terms. This can make it easier for contractors with shorter or newer contracts to qualify for a mortgage.
- Contractor and Gross Income Consideration: Unlike many lenders who require self-employed individuals to provide two years of accounts and base lending on net profit, Halifax treats contractors differently. They consider gross income rather than net profit, simplifying the process and potentially increasing borrowing capacity.
- High Income Multipliers: Halifax offers high income multipliers, up to 5.5 times the annual income plus the deposit. This allows contractors to borrow more compared to many other lenders who might use lower multipliers.
- Competitive Rates: Halifax often provides competitive, market-leading interest rates. This can make mortgage repayments more affordable over the term of the loan.
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Halifax contractor mortgage criteria
Halifax offers a flexible and accommodating approach to contractor mortgages, making it easier for contractors to secure mortgage financing based on their unique employment and income situations.
Income and Employment Status: Halifax accepts the gross value of income for contractors or can treat them as self-employed, depending on preference or circumstances. To be treated as employed, contractors need either 12 months of continuous employment with at least 6 months remaining on their contract or 2 years of continuous service in the same type of employment.
Employment History: Preferably, contractors should have no significant gaps in their employment history.
Income Requirements: The minimum day rate for non-IT contractors is £326 per day. There is no minimum income requirement for IT contractors, and more leniency is given regarding their contracts.
Contract Value Calculation: The gross value of the contract is calculated based on the daily rate multiplied by 5 days per week and 46 weeks per year. If the contract specifies lower actual hours or days worked, those figures will be used instead. Only one contract can be used for affordability assessment.
Company Structure and Deposit: Halifax accepts applications from contractors operating via a limited company or under IR35, with a minimum deposit requirement of 5%.
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How Much Can I Borrow on a Halifax Contractor Mortgage?
To calculate your borrowing capacity with a Halifax contractor mortgage, use this formula:
Income Calculation: Multiply your day rate by the number of days worked per week, then multiply by 46 weeks (to account for time off for holidays and sickness).
Example:
- Day rate: £400
- Days worked per week: 5
£400×5×46=£92,000 annual income£400 times 5 times 46 = £92,000 text{ annual income}£400×5×46=£92,000 annual income
Borrowing Capacity: Halifax usually offers 4.5 to 5 times your annual income, but for higher earners, it can go up to 5.5 times.
At 5 times income: £92,000×5=£460,000£92,000 times 5 = £460,000£92,000×5=£460,000 + deposit.
Halifax Contractor Mortgage Rates
Halifax contractor mortgage rates are the same as those offered for any other Halifax mortgage. The primary difference lies in the criteria used to assess contractor income. The actual rates you receive will depend on the current market rates at the time of your application, the size of your deposit relative to the value of the property (Loan-to-Value ratio), and your individual financial circumstances. Halifax is known for offering competitive, often market-leading rates. For the most accurate and up-to-date rate information, it’s best to consult directly with Halifax or a mortgage advisor.
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Special Terms for IT Contractors and High Earners with Halifax
Halifax offers special terms specifically for IT contractors and high earners (those earning above £500 per day or £75,000 per year). These terms include more leniency regarding contracting history and the length of time remaining on contracts. This makes it easier for IT contractors and high earners to qualify for a mortgage, even if they have shorter contracts or less continuous employment history compared to other applicants.
How much deposit do I need?
For a Halifax contractor mortgage, you will need a minimum deposit of 5% of the property value. However, having a larger deposit can help you secure a better interest rate and potentially increase your borrowing power.
Best contractor mortgage rates
The best contractor mortgage rates will depend on several factors including the rates at the time of your application, your deposit size, loan-to-value ratio, and your credit score. Halifax is known for offering competitive, often market-leading rates, but it’s important to check the current rates or speak with a mortgage advisor for the most accurate information.
Alternative Contractor Mortgage Lenders
Several lenders, in addition to Halifax, offer contractor mortgages. The terms vary depending on contract length and income amount, with some being more generous than others. Notable alternatives include:
- NatWest:
- Bank of Ireland:
- Nationwide
- TSB
- Virgin Money
Documents Needed for a Halifax Contractor Mortgage
To apply for a Halifax contractor mortgage, you will need the following documents:
- Identification (ID): A valid form of ID such as a passport or driving license.
- Proof of Address: Recent utility bills, bank statements, or council tax bills showing your current address.
- Latest Contract: Your most recent contractor agreement detailing your day rate and terms.
- Payslips (if applicable): Recent payslips if you have any, to show additional income.
- Bank Statements: Recent bank statements, particularly if they do not show credits from your contracting income.
You will not need to provide accounts or tax returns for a contractor mortgage with Halifax.
How can Strive help?
At Strive, we are experts in mortgages for contractors. We understand the unique financial situations that contractors face and provide personalized advice tailored to your specific needs. Our strong relationships with a range of lenders who offer contractor-friendly mortgage products ensure that you get the best rates and terms available. We guide you through the entire mortgage application process, making it as smooth and stress-free as possible. By leveraging our expertise, you can secure a mortgage that fits your financial circumstances and helps you achieve your property goals.
FAQ’s
No, it is not necessarily hard to get a mortgage as a contractor, especially with specialist advice and lenders who understand contractor income. Lenders like Halifax offer flexible terms tailored for contractors.
Yes, you can get a mortgage on an IR35 contract. Many lenders, including Halifax, accept applications from contractors working under IR35 arrangements.
Yes, lenders like Halifax calculate borrowing amounts based on your contract day rate. They typically annualise your day rate to determine your gross annual income for mortgage purposes.
Yes, contractors can get a mortgage. There are many lenders that offer mortgage products specifically designed for contractors, taking into account their unique income structures.
Yes, you can get a contractor mortgage without needing to provide accounts or tax returns. Lenders like Halifax focus on your current contract and bank statements instead.
The length of time you need to have been contracting can vary by lender. For example, Halifax often requires either 12 months of continuous employment with 6 months remaining on the contract or 2 years of continuous service in the same type of employment.
Yes, you can get a mortgage with a 6-month contract, especially if you have a history of contracting or if it’s a renewal of a previous contract. Halifax, for instance, offers leniency for contractors with shorter contracts, particularly for IT contractors and high earners.
Contact us today, and we’ll work hard on your behalf to find you a competitive mortgage.
For more information on mortgages for contractors, please contact a member of the Strive team, by emailing [email protected] or call us on 01273 002697.
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