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90% LTV mortgage for contractors and self-employed

Christian Draper, Head of Property Saffron Building Society
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Saffron Building Society, a broker-linked mortgage provider, has launched two 90 per cent loan-to-value mortgages for contractors and the self-employed.  

The three-year deal is offering a 90% LTV mortgage for the self-employed, with a discounted rate of 4.29% and a contractor equivalent with a 4.19% discounted rate, also for three years.

Contractors

For a price comparison, a contractor looking for a mortgage of £235,714 payable over 20 years 0 months, initially on a discounted rate for 3 years 0 months at 4.19% and then a 1.00% discount off Saffron’s current Standard Variable Rate Mortgage of 5.39% to give a current rate payable of 4.39% (variable) for the remaining 17 years 0 months, would require 36 monthly payments of £1,458.46 and 204 monthly payments of £1,480.48.

The total amount payable would be £354,522.31 made up of the loan amount plus interest (£117,774.31), an application fee of £180 and a redemption fee of £80.

Self-employed

Up until now, self-employed products had been limited to 80-85% LTV.

The mutual said for those businesses that started trading before the 2020/1 tax year, its underwriters may be able to discount the pandemic year from an application from the affordability assessment.

A mortgage of £275,163 payable over 20 years 0 months, initially on a Discounted rate for 3 years 0 months at 4.29% and then a 1.00% discount off our current Standard Variable Rate Mortgage of 5.39% to give a current rate payable of 4.39% (variable) for the remaining 17 years 0 months, would require 36 monthly payments of £1,716.21 and 204 monthly payments of £1,729.09.

How much deposit do I need for a contractor mortgage?

For lower-risk borrowers, it should be possible to get a contractor mortgage on a residential property with a 10% deposit, according to Online Mortgage Advisor. This means that the loan would be offered with a 90% loan to value ratio, and to get the lender to agree to that, it will help if your contract has been renewed at least once and has a minimum of six months left to run on it.

Most lenders will accept a 10% deposit for a contactor mortgage, but some might expect 15-20% if there’s risk involved in the deal (e.g. bad credit, non-standard construction), the mortgage site said. A few, however, might consider offering a mortgage with a loan to value (LTV) ratio of 95%, under the right circumstances.

It may be possible to get a contractor mortgage from certain specialist lenders with a 5% deposit, thanks to government schemes such as Help to Buy.

However, if you are an IT contractor you are considered ’employed’ in the eyes of some lenders, such as Halifax, so you could be looking at much lower interest rates.


IR35: All IT contractors deemed “employed” under Halifax mortgage criteria; Plus Expert Application Tips For Contractors – Freelance Informer

Self-employed Mortgages: How to best prepare – Freelance Informer

What are allowable expenses if you’re self-employed? – Freelance Informer

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