This is CMME's latest contractor mortgage guide for UK contractors and freelancers.

1. Mortgage Guide
for Contractors

2. CONTENTS
Introduction 02
Getting a mortgage as a contractor 03
Types of mortgages 04
How much could you borrow? 06
It’s important to get the right mortgage 07
What deposit will you need? 08
Types of mortgage products available 09
Overcoming the hurdles 11
Fees included in the mortgage process 12
Tips to make the process easier 13

3. INTRODUCTION
Obtaining a mortgage as a contractor can be a
hassle. Learn about how this has changed and
your options in this guide.
Getting a mortgage as a contractor has become
easier. A mortgage is likely to be the biggest fi-
nancial commitment that you will ever enter in to.
The process can be long and daunting, but one
thing it does not have to be is difficult, we can
help with this. Before arranging your mortgage,
there are many questions that you will want to
answer. Of course, you can get a mortgage
broker on board to do the work for you, but it will
be up to you to make the decisions.
- How much can I realistically afford?
- What type of mortgage should I choose?
- How does the process work?
- What obstacles am I likely to come across as
a contractor?
These are just some of the questions that you will
want to answer.
We have created this simple guide to help you
understand everything you need to know about
obtaining a mortgage as a contractor. We hope
that with this guide and advice from a broker, you
will be in a confident position to make the right
decisions for you.
Introduction 02

4. When lenders assess a contractor for mortgage
affordability without specialist underwriting
procedures in place, they will want to verify
income by seeing two to three years’ worth of
accounts or tax returns. As many lenders have not
kept up with changes in the labour market, their
criteria will often fail to accommodate the growing
ranks of contractors.
Umbrella company contractors will find that many
of their expenses will not be considered when
calculating income; if the lender understands the
concept of an umbrella company at all. Limited
company contractors will experience a similar
problem, as any money retained in the company,
for tax purposes, will also not be considered. Both
methods of operating are likely to lead to a
shortfall in borrowing.
Generally, banks and building societies only lend
to those who are considered a low risk, and
contractors are regarded as high risk. The reason
being is that lenders worry that these individuals
will struggle to afford their monthly payments
when their current contract comes to an end.
GETTING A MORTGAGE
AS A CONTRACTOR
Getting a mortgage as a contractor 03

5. Types of mortgages 04
TYPES OF
MORTGAGES
First Time Buyer
Getting on to the property ladder should be an exciting time for individuals. The reality is that many
lenders have become increasingly strict about who they will lend to, and as a result getting a home can
feel like a distant dream.
There is no point starting your property search until you have worked out your budget. Lenders will look at
your income and your outgoings, including any existing credit arrangements.
If you do happen to have any loans or credit cards, it is worth paying some of the debt off before applying
for a mortgage if you are in a position to, in order to help boost your credit rating. Keeping on top of any
payments will show the lender that you are a responsible borrower.
Next you will have to ensure you have enough money saved up to cover your deposit. he more you have
to put down as a deposit, the more products and options you will have available to you. It is possible to
secure a mortgage with a 5% deposit; however, you will have access to more competitive products if you
have a 10% deposit or more.
Help to Buy
There are also government schemes available that help first time buyer’s get on the property ladder.
The Help to Buy initiative has two distinct offerings. The first scheme involves the government supplying
up to 20% deposit, while the borrower would contribute 5%.
This enables first time buyers to access more competitive schemes. The 20% from the government still
needs to be repaid, but is interest free for 5 years.
The second scheme allows first time buyers to purchase a property with a deposit as little as 5%. The
government provides the lender with a guarantee on part of the loan.
Next Time Buyer
If you are planning on relocating, the first thing you should do is look at your existing mortgage to check
that you are allowed to move without incurring any penalties. If you have already reverted to your lender’s
Standard Variable Rate (SVR) you should be able to switch to another scheme or provider.
If you are upsizing, you might be planning on increasing your mortgage to cover the new home. If this is
the case you must remember that in order to do this you will have to apply for the mortgage in the same
way you did as a first time buyer.
Lending criteria has generally become much stricter, so although your circumstances have not changed,
you might struggle to obtain a mortgage. If that was not bad enough, contractors find it even harder to
secure the level of funding they want.
A specialist broker can look at your circumstances and establish the most cost-effective option to suit your
position and lifestyle.

6. Types of mortgages 05
Remortgaging
Remortgaging is not something that everyone considers, but in most circumstances the process is quick
and straightforward and can essentially save you a lot of money. In addition to providing the same
documents that you presented when you originally took out a mortgage, you will need a mortgage
settlement figure from your existing lender. The property will be assessed by way of a valuation by the
new Lender to confirm the value of the property and that it is suitable security to lend against.
If you are stuck on an existing scheme, it is wise to research the penalties you could incur if you were to
switch lenders before the scheme comes to an end. A specialist broker can undertake a mortgage review
and establish whether there is a more cost-effective product available, while taking in to account your
circumstances as a contractor.
Buy to Let
Buy to let mortgages are a popular investment strategy for contractors in the UK. There are many lenders
that offer mortgages specifically for the buy to let market. Most require at least a 25% deposit.
If you are thinking about buying a property to let, there are a number of things that need to be considered,
including but not limited to; tenants, condition, location, rent and maintenance.
Second Charge Mortgages
Second Charge Mortgages or Secured Loans are quickly becoming part of mainstream lending, as more
homeowners than ever before look for an alternative to remortgaging or taking out a personal loan.
They use the borrower’s home as security, helping them to raise funds against their property for a wide
range of purposes. They are often used to raise additional funding when a homeowner’s existing lender
will not, or cannot, release any additional funds.
From raising funds for home improvements, or for the purpose of buying a new vehicle through to paying
for a wedding, injecting cash into a business, paying a tax bill or even covering University fees, there are a
huge amount of reasons why people decide to take out a Second Charge Mortgages/Secured Loan.
A specialist
mortgage broker
with bespoke
underwriting can
offer advice and
guidance

7. How much could you borrow? 06
HOW MUCH COULD
YOU BORROW?
In the past, most lenders worked out what they would lend you by typically multiplying your
sole or joint income by a fixed number. This is now not the case.
Currently, most lenders look at a full financial picture, including:
- Your monthly pay
- Income from investments
- Income from pensions
- Income from child maintenance or grants
They will also look at your available credit, how much your disposable income amount each
month and other bills/debts etc.
This information will allow a lender to develop a good understanding of how much you will
realistically be able to pay back each month, thereby helping them to calculate how much they
will be willing to let you borrow.
Make sure your spending habits are allowing you to live well within your means, and if you’re
able to pay off any unsecured loans and credit cards then do so, as they can impact your
borrowing potential.
Using an online mortgage calculator can be a great tool with your initial mortgage planning.
with an estimation of how much you could borrow, you can start to plan your deposit amount
and also understand if you need to continue saving, understand your monthly repayment
amount, ensure you have enough aside to cover any fees and potential property can become
much simpler.

8. How to get the right mortgage 07
IT’S IMPORTANT
TO GET THE
RIGHT MORTGAGE
Although it might seem impossible, contractors can obtain
competitive mortgage funding. It is even possible for them
to secure funding with lender’s that may have previously
turned them down; however, these lenders need direction
from specialist brokers.
Presenting the required information correctly is a funda-
mental aspect for contractors, to ensure they can borrow
the funding that they need. The application must be
presented in such a way that the lender looks at the bor-
rower and does not see them as a higher risk.
There are two problems that need to be tackled:
- Proving full income in a suitable way to support the level
of funding required.
- Providing proof of long-term experience within an in
dustry to show future employability, demonstrating that
the monthly payments will still be paid when the current
contract comes to an end.

9. Do I need a deposit?
To allow lenders to consider loaning you money, you’ll need a substantial amount of up-front cash:
a deposit. A greater deposit means you will have access to better interest rates. However, most
mortgages need at least 5% of the property value, which for some, can be a substantial amount
of money. The money may come from hard work and saving, money from parents/grandparents,
or even from receiving an inheritance. Either way the larger the deposit, the more access to com-
petitive rates you will have. This, in turn, means lower monthly payments and a cheaper mortgage
overall. However, obtaining that first deposit can be hard for some.
Schemes to help with deposits
In recent years, there have been a few schemes set up by the government that can help you to
achieve your deposit goals.
What deposit will you need? 08
WHAT DEPOSIT
WILL YOU NEED?
Help to Buy ISA
This was set up by the
government in December 2015.
People over 16 can earn interest
of up to 4% on money in the ISA
and get 25% added on top when
they withdraw the money to use
it for a mortgage deposit.
The Help to Buy ISA is available
for new savers until 30th
November 2019, however you
can still keep saving in your
account if you opened it before
then. You must claim your bonus
by the 1st December 2030.
Help to Buy Equity Loan
Help to Buy Equity Loans are
open to both first-time buyers
and home movers on new build
homes in England. Once you
have acquired a 5% deposit, the
government will add on a loan of
up to 20%, meaning that you’ll
have a total of a 25% deposit. No
fees will be applied for the first
5 years of owning your home. In
the sixth year, a charge of 1.75%
of the loans value will be applied.
Beyond this, the fees will
increase each year in line with
the Retail Price Index (RPI). In
November 2015, the
Government announced an
extension of the initiative up to
2021.
Help to Buy London Equity
Loan
Due to the increased property
prices in London, Help to Buy
will lend you up to 40% of the
cost of your new home up to the
value of £600,000 in all London
boroughs. Along with your
deposit of 5%, this will give
borrowers a 45% deposit to
purchase a new build property.
As with the standard help to
buy equity loan no fees will be
applied for the first 5 years of
owning your home.

10. Before you begin the process of finding a mortgage, you will need to consider which type of
mortgage is right for you.
Repayment or interest only?
Repayment mortgage options guarantee that you are paying off some of your loan every month
whereas Interest-only mortgages just pay the interest on the loan and none of the original loan.
Most lenders will not usually offer interest only schemes unless the LTV (Loan-to-Value) ratio is
below 50% or you are looking at an investment Buy to Let loan.
What type of deal?
As well as deciding how to repay your mortgage, you also need to think about various types of
mortgage products available. Usually, lenders offer new customers special low-interest deals, also
known as an incentive product, for a set number of years to attract them, but many include a range
of different advantages and disadvantages.
Types of mortgage products available 09
TYPES OF MORTGAGE
PRODUCTS AVAILABLE
Fixed Rate
Gives you the security of
knowing that regardless of
what happens in the market,
your payments and interest
will stay the same. However, if
rates fall, your payments will
not.
Variable Rate
This rate allows payments
to fluctuate (higher or lower)
depending on factors such as
the UK economy and the
lender’s appetite to retain
existing borrowers.
Tracker Rates
This rate tracks another rate
indicator, usually the Bank of
England Base Rate. Although
this is a transparent indicator
and not influenced by the
lender, if interest rates change
dramatically so will your
mortgage payments.
Standard Variable Rates
This is the rate set by the
lender. After an initial product
period, you would normally
revert to this rate and it will
be higher than the incentive
product you were on
previously.
Discounted Rates
This product offers a discount
off the Standard Variable Rate
for an agreed period of time,
usually 2 to 3 years.

11. Flexible mortgages
Once you have decided on your mortgage product, you then have to decide whether or not you
want your mortgage to be flexible. Some of the options available on a flexible mortgage allow
you to increase or decrease the amount you pay each month.
For example, if you receive a sum of money you can choose to either pay this as a lump sum off
your mortgage or as a regular additional payment, allowing you to decrease your overall balance
and saving you on interest in return.
If you need to, you can also underpay or agree a payment holiday for a set period with your
lender.
Offset
An offset mortgage is linked to one, or sometimes multiple, bank or savings accounts, and allows
you to use your additional savings to decrease your interest payments. For a standard mortgage,
your interest payments are calculated based on the total amount you owe.
With an offset deal, you deposit your savings into an account that is linked to your mortgage.
These savings are deducted from amount you owe before interest is calculated – so you only
pay interest on the difference.
Types of mortgage products available 10

12. OVERCOMING
THE HURDLES
A specialist mortgage broker can help with the
process as they will have a thorough
understanding of contractors and contractor
friendly mortgage lenders. These brokers have
designed bespoke contractor-based underwriting
with many lenders, which means contractors are
able to avoid the traditional frustrations.
This unique underwriting ensures that your
income will be assessed using a multiple of your
gross annualised contract rate, using this figure
to calculate how much you can borrow based on
your true earnings.
Essentially this means you will be able to secure
a larger mortgage than if traditional underwriting
was used as you are no longer penalised for using
a tax efficient method of earning. The mortgage
broker will be able to present your circumstances
upfront to the most suitable contractor- friendly
lender.
There are two essential pieces of documentation
initially needed by a specialist brokers to prove
longevity and affordability to the lenders:
- A copy of your current contract
- An up to date copy of your CV
These items will allow specialist brokers to
approach lenders even with an absence of
traditionally requested self-employed documents
such as trading accounts.
Overcoming the hurdles 11

13. FEES INCLUDED IN
THE MORTGAGE PROCESS
Whether you are buying a house for the first time or the third, there are other costs involved
which need to be taken into account. It is possible to add some of the costs of the fees on to your
mortgage, but some individuals prefer to pay them upfront. Fees you can expect include:
Arrangement Fees
This can also be called a Product or Completion Fee and is a fee the lender charges for
setting up your mortgage. The amount you can expect to pay varies depending on the mortgage
scheme, rate and lender.
Valuation Fees
This is a fee the lender charges for carrying out a valuation of the property. The purpose is to
reassure the lender that the property is a solid asset to lend against. The cost varies depending
on the lender and the value of the property.
Legal Fees
This is a fee the solicitor or conveyancer will charge for the legal work they carry out. This
includes conveyancing and searches on the property. The cost varies depending on the solicitor,
the property and the type of buyer you are.
Stamp Duty
As of the 22nd November 2017, the government announced a stamp duty relief for first-time
buyers, provided the property purchase price is £300,000 or less you will pay no stamp duty
(SDLT).
If the property is valued over £300,000 but does not exceed £500,000 you will pay 5% of the
purchase price. This applies to properties in England and Northern Ireland, however, there are
different transaction taxes to pay in Scotland and Wales.
Fees included in the mortgage process 12

14. TIPS TO MAKE
THE PROCESS EASIER
3. BALANCED
Tips to make the process easier 13
Understand your financial position
First thing’s first, you’ll need to get a good understanding as to whether you’ll be able to obtain a
mortgage and, if so how much you’ll be able to borrow to finance your property. Speak to a broker,
who will be able to advise you based on your current financial position.
You’ll also need to make sure you understand the costs involved in buying a property, as well as how
much you’ll need to save for a deposit.
Understand what lenders look for in applicants
All too often, potential homeowners assume that they will not be accepted for a mortgage and put
their plans on hold before they’ve even started the application process.
When any lender approves a mortgage, they take on a certain level of risk. After all, there’s always
a chance that a borrower will default on their repayments. To minimise that risk and ensure they only
lend responsibly, lenders must undertake an assessment in order to decide whether or not it is a risk
worth taking.
Start saving!
A minimum deposit of 5% of the property value will be required, subject to criteria and credit profile.
Plus, you’ll need to allow for additional costs involved when purchasing a property such as stamp
duty, solicitor fees, mortgage product/application fees, property surveyor fees. assessment in order to
decide whether or not it is a risk worth taking.
Credit history!
Your credit history will have an impact on your ability to secure a mortgage.
This will tell a lender how likely you are to keep up with your payments; considering factors such as
previous loans if you’ve ever defaulted on a loan and if you have any CCJs.
Lenders will look at this history and assess the risk of you defaulting on the loan they’re considering.
If you have limited history or have never held open credit in the past this could also have an impact on
your ability to secure a mortgage.
Get your finances in order
If you have any significant credit card debt or personal loans, this could impact upon your ability to
pass an affordability test, particularly credit card debts with high levels of interest.
Try and clear as much of your existing debt as possible before you start to apply for a mortgage.
Look carefully at your outgoings and identify any areas where you could cut back. That will bring your
outgoings down, but it will also show that you’re careful with your money and, of course, help you
save money, which is always beneficial!

15. Tips to make the process easier 14
Do your homework
With the increasing number of banks and other mortgage lenders in the UK market, there are potentially
thousands of mortgage deals to choose from; so ensure you take time to understand the different options.
Using a mortgage broker can help you determine the most suitable options.
Moreover, if you’re self-employed or contracting, lenders do not always take a holistic view of your income
or borrowing potential and a specialist broker can help you present your case in the right way, to secure the
best deal for you.
Get your paperwork together
Being able to provide supporting documentation in a timely manner is critical to a successful application.
Typical requirements include; ID and proof of address; so ensure your passport and driving license is correct
and in date.
Income evidence and proof of financial readiness are also key, and you will likely need to provide a
combination of the following depending on your employment setup - P60, 3 months of bank statements,
payslips or 2-3 years of company accounts/SA302’s (or the online equivalent).
If you are a contractor, make sure your CV is up to date as it may be used to prove your skills and
experience. You will also need to obtain a copy of your current contract as this will be used to demonstrate
your income. Using both these documents should avoid any issues to do with affordability.
Use a specialist broker
The truth is that most lenders have little understanding about the contracting market, and as a result, their
standardised lending procedures do not accommodate contractors.
We have bespoke underwriting arrangements with a comprehensive range of lenders, enabling us to secure
mortgage funding often based on a multiple of your contract rate alone.
The search
Once you’ve got the legal and financial side of things in order, it’s time to start the exciting part – the
property search! Consider the areas you’d like to buy your home in, the type of property you’re looking for,
and any other requirements you have.
When it comes to viewings, it’s always a good idea to visit several potential properties as this will help you
to start narrowing down the search, giving you a better idea of what you want, and where.

16. Albany House,
5 Omega Park,
Alton GU34 2QE
Tel: +44 (0)1489 555 080
www.cmmemortgages.com
CMME is a trading name of CMME Mortgages and Protection Limited. Authorised and regulated by the Financial Conduct Authority
(FCA reg. 414798). Registered in England No. 04886692. Registered Office: Albany House, 5 Omega Park, Alton, Hampshire, GU34
2QE. Please be aware that Commercial Mortgages, Overseas Mortgages and some Buy To Let Mortgages are not regulated by
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