It’s an unfortunate truth that getting a mortgage as a locum – in common with the self-employed, contractors and other workers without a fixed, regular salary – can be a little more involved than we’d sometimes like it to be.
That said, it isn’t necessarily the daunting and complex procedure that some would have you believe, either. While not all mortgage lenders are as sympathetic to those outside of salaried employment as they might be, most have well-established and logical – and, sometimes, flexible – underwriting policies for evaluating mortgage applications from those with variable or irregular income streams.
To give you an expert opinion, we caught up with Rana Miah, director of Just Mortgage Brokers, who specialise in securing competitively priced contractor mortgages…
What Will Lenders Need from You?
When assessing a mortgage application from someone in paid employment, a lender will usually request at least three months’ payslips and bank statements, as well as seeking confirmation of the applicant’s work status directly from their employer.
For locums and other contract workers this isn’t appropriate, so instead they will usually ask to see your accounts – typically two years’ worth, although some lenders may request accounts covering a shorter or longer period.
The lender might ask to see copies of your HMRC SA302 tax assessment calculation (again, typically for the past two tax years) either as well as or instead of your full accounts. Your accountant should be able to help you provide the lender with the requested paperwork; in fact, most lenders require any business accounts submitted in support of a mortgage application to be certified by an accredited chartered accountant.
How Will Your Mortgage Application Be Assessed?
If you are self-employed as a sole trader, the lender will assess your income by looking at your net profit figures. If, on the other hand, you run your locum business as a limited company registered with Companies House, the lender will typically take into account both the salary you pay yourself and any dividends drawn from the business.
It’s important to approach the application with a good understanding of your own finances, and you should be prepared to honestly answer any questions the mortgage assessors may have about the sustainability of your income, particularly if your accounts show dips, gaps or other irregularities in your previous earnings.
How Can You Help?
To allow the application to go through as quickly as possible, it’s always a good idea to be well prepared. Here’s a link to some guides you might find useful.
Gather whatever paperwork you may need – business accounts, SA302 forms, bank statements, details of any existing credit commitments and so on – before you even apply for a mortgage.
It’s also sensible to check your credit rating and/or obtain a copy of your credit files beforehand; even if you’re not aware of having had credit problems in the past, it’s all too common for rogue items like a late electricity payment or a disputed mobile phone bill to leave an unexpected mark on your credit record – it’s better to know about this in advance than to find out when the lender queries it.
If you have any questions about your mortgage options as a locum worker or the process of applying for a contractor mortgage, please ask the experts at Just – we’ll be happy to help!