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This content is for intermediary use only. If you're a mortgage customer, please
click here.
Aldermore is giving you and your contractor clients more choice and flexibility, so they can access the mortgage they need.
Contractors in the UK are a pretty diverse bunch, from locum doctors to IT professionals, supply teachers and CIS subcontractors.
Contractors work under many different structures and arrangements, which means their finances do not always neatly fit into either a standard employed or self-employed underwriting approach.
At Aldermore, we don’t believe this makes them unsuitable for a mortgage.
Contractors make up a significant number of our nation’s workers, entrepreneurs, business owners and wealth creators. We champion those who work for themselves, from sole traders to company directors, backing Britain’s self-employed to reach their homeowning goals. That’s why we’ve recently improved our mortgage proposition and criteria to become an even more contractor-friendly lender, giving your clients more choice and flexibility.
Your clients who work on a contract basis often need a specialist’s view. Aldermore is pleased to announce that we can now offer a wider range of options for contractors that want to be assessed for affordability based on their gross annual income.
Key points to consider:
We currently allow self-employed contractors (limited company directors and sole traders with no other employees) to choose for their affordability to be assessed on an employed basis using gross income (their day rate multiplied by working days and up to 46 weeks per year), if that works better for them.
We now allow contractors that work via the Construction Industry Scheme (CIS) and Zero-hour workers to be assessed in a similar way.
For CIS workers to be assessed using gross income, we’ll require 12 months of contract history and three months of payslips, and where contracts cannot be provided, confirmation from a qualified accountant can be used to evidence their time on the CIS scheme.
Zero-hour workers are also supported within our updated approach. For non-professional roles we’ll require two years of experience at the same company to evidence sustainable hours, supported by the last two P60s and last 3 months' payslips.
For those working in a professional role, such as IT consultants, specialist medical practitioners of education professionals, we’ll require at least 12 month income evidence.
For contractors in general, there’s no longer a strict 6 month minimum contract length requirement, provided the customer can evidence short gaps via a 12-month contracting history. The standard time remaining on a contract is now one month prior to the offer being made, or evidence of a renewal.
We’ve also increased the maximum loan to value for day rate contractors, allowing up to 95% LTV across all contractor types, including Fixed Term Contractors, those working via an umbrella company, CIS and zero-hour workers.
Of course, your contractor client can still decide to have their affordability assessed on a self-employed basis in the usual way. In that case, we’ll base their income on either dividend plus salary or salary plus share of net profits for limited company directors (or just net profit for sole traders), whichever works out best.
It’s up to them how they want us to assess their earnings and, as their adviser, you can guide them to the right option for their circumstances.
Our updated proposition supports flexibility of underwriter decision-making, allowing Aldermore to consider different employment types in contractor history, longer gaps between contracts and first time contractors.
Our mortgages are also available to those working up to two contracts at the same time, as long as their total weekly hours are reasonable.
Importantly, all contractors can also access products across all of our adverse credit tiers. We understand that the variability of contractor income can result in credit blips that don’t necessarily reflect the borrowing potential of your client.
We’ll listen to their story to understand the reasons for any adverse credit and lend where we can.
As well as making our products and criteria more contractor-friendly, all cases are assessed by dedicated underwriters who will take each case on its merits.
Contractor income is varied and often complex, so the ability to be flexible where a case falls outside lending criteria means our underwriters can say yes to more of your clients. Any case that doesn’t meet minimum criteria in a certain area must be strong elsewhere to be considered.
We can support contractor clients who have been ill or unable to work for a legitimate reason, leading to a one-off gap, for example. And we can help those who switch between employed and self-employed contracts or who may not have one year’s accounts aligned to the end of the last tax year.
Our criteria means we can lend to first time contractors who have been PAYE in the same line of work for the previous 2 years.
A typical scenario might be, John Thomas, from Stockport, recently moved from employment to self-employment, forming his own company. He worked as a town planner for 15 years before recently setting up his own limited company, with his most recent salary being £80,000 per year. He now has a new six-month contract in place with a local authority but can’t apply for a mortgage as self-employed, as he has no tax documents or accounts history.
John has now started his new contract and can provide evidence via remittance slips. Therefore, Aldermore is now able to consider his application by assessing the case based on his gross income (using his daily rate). John earns £400 a day, so we can consider his remortgage application based on an income of £92,000 a year (calculated as £400 x five days x 46 weeks).
Contractor income can be complex and we know that what’s on paper doesn’t always reflect your client’s current earnings or affordability potential.
By allowing eligible self-employed contractors the choice to be underwritten based on net self-employed earnings from end of year accounts or gross income from their contract, we can better support this underserved market.
And by trusting our expert underwriters to get under the skin of an application and make a pragmatic decision, we can say yes to more of your clients.
Aldermore’s latest changes are designed to give clients and brokers more choice and make us one of the most contractor-friendly lenders in the market.
We’re already well known for our support of the self-employed and this is another way we can be more flexible in supporting clients who can’t readily access a mortgage on the high street.
FOR INTERMEDIARY USE ONLY
We know that as an intermediary, you'll have clients who need a more specialist approach to lending.