Mortgages Archives - Page 23 of 23

How to get a mortgage on a fixed term contract

by Kristian DerrickPosted on 15th July 2019 | Updated 20th January 2023

If you’re a temporary worker or on a fixed-term contract, you may assume that you aren’t eligible for a mortgage.

In actual fact, even if your income varies due to a temporary contract you can still be accepted for a mortgage.

There are a number of specialists – and in some cases even mainstream lenders that offer mortgages to people on temporary contracts.

If you have been employed in your current line of work for over a year, and haven’t had prolonged periods of unemployment, you have a good chance of having your mortgage application approved.

In this guide, we will discuss potential routes to securing a mortgage on a fixed-term contract, which may be applicable to the following scenarios:

Getting a mortgage on a temporary contract.
Mortgages for temporary workers.
Mortgages for fixed-term contracts.
Mortgages for zero-hour contracts.

How Can you Get a Mortgage on a Fixed Term Contract?

It is certainly true that if you are a temporary worker it can be more complicated to get a mortgage than those in permanent positions.

Before any provider will consider you for a mortgage, they will need to see comprehensive evidence that you can make monthly repayments for the duration of your loan.

Therefore, you will need to prove that you will have a regular income, which can be difficult on a temporary or fixed-term contract, as your earnings can fluctuate or even stop between jobs.

This makes you a higher risk lender than those that have a guaranteed regular income. However, here are some temporary contracts that lenders view more positively than others.

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For example, those with in-demand professions, such as doctors and substitute teachers, on ‘zero hours’ contracts working when needed, are usually offered mortgages, particularly if they can prove they have been in their profession long-term.

On the other hand, if you are a seasonal worker, you are much less likely to be considered for a mortgage as your contact is short term.

It is always worth speaking to an experienced mortgage advisor about your situation as lenders treat all mortgages individually and will take a number of factors into account before making a decision.

A mortgage advisor has access to the whole market and will be able to find you a selection of lenders that consider or specialise in temporary contract mortgages and help you secure a mortgage on a fixed-term contract.

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Getting a Mortgage As A Temporary Worker

Whether you are in a probationary period or on a temporary contract, there are a number of lenders out there that will consider you for a mortgage.

Even as a temporary worker, you can still fit the affordability criteria for a mortgage, as long as you have been in your role for a significant amount of time.

Even if your circumstances are different, such as your contract has just started, you still may be eligible, depending on how closely you fit a mortgage provider’s lending criteria.

Eligibility Criteria For Fixed Term Contract Mortgages

As a temporary contract does not provide the guaranteed income that lenders prefer, the eligibility criteria for a mortgage may be stricter to offset the extra risk. Here is an overview of the criteria a lender will consider for a temporary contract mortgage:

Time in Your Current Role or Agency

Although the criteria will vary between providers, lenders will have a minimum requirement for the length of time you have been in your current role. Whilst many lenders will require a minimum of 12 months, others may require less, or even have no minimum at all as long as you have been working for the same company in other positions.

For agency workers applying for a mortgage, lenders will usually require you to be employed with the same agency for at least 12 months. However, there may be some specialist lenders that will consider your application if you have been working in the same role with a different agency for 12 months.

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Length of Current Contract

Those with short-term contracts may find it difficult to secure a mortgage from mainstream lenders, as there is a larger risk attached to loans for those without guaranteed long-term employment.

Lenders will want to know the time left required on your current contract before they consider you for a mortgage. This will vary between lenders between 3 and 12 months.

Regular renewals of your contract will encourage lenders, making them more likely to consider you if you have only a few months left on your current contract.

Additionally, written confirmation of a renewal of your contract would encourage lenders to consider you even if there are zero months left in your current position.

Breaks in Employment

Breaks in employment can cause a problem for lenders as they will want to know that you have a reliable and consistent income to cover the monthly mortgage payments.

You may be ineligible with some loan providers if you have had an employment gap in the last 12 months. However, other lenders may have less strict restrictions, as long as you have a sustainable income.

Furthermore, the definition of what constitutes a gap in employment may vary between lenders. Some may consider just a single week to be a break in employment that can affect your mortgage options. Other lenders may accept a gap of 4 weeks between contracts, as long as there is an acceptable explanation.

Whilst a long run of regular employment is more desirable to mortgage providers, it is not impossible to get a mortgage with breaks in your employment history.

Get in touch with a mortgage advisor that has access to the whole market. They will be able to match your circumstances to the eligibility requirements of mortgage providers.

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Quick help mortgage guides:

How Much can Temporary Workers Borrow?

If you have a good employment history, with no gaps and a contract that still has a long term to go, there is a very good chance that you can secure a 95% mortgage and up to 5x your income. However, if there are gaps between your contracts, you may need a larger deposit.

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Improving your Chances of Securing a Mortgage as an Agency or Temporary Worker Mortgage

If you are a temporary worker, there are a number of things you can do to improve your chances of getting a mortgage offer. They include:

Prove Your Income – Provide payslips for the past year, as well as two previous P60 forms or tax returns.
Show Stability – Showing a lender that you have been in the same line of temporary work for over 12 months will greatly boost your chances of being accepted.
Provide Bank Statements – This will show lenders your earnings and outgoings, which can be used to determine if you have the necessary disposable income for mortgage payments.
Improve your Credit Score – You can do this in a number of different ways, such as paying down the balance of any credit cards, make bill payments on time, and don’t apply for multiple mortgages without talking to an advisor to avoid multiple enquiries.
Collect as Much a Deposit as Possible – A bigger deposit can really help improve your chances of getting a mortgage as a lender considers this as a lower risk. Generally speaking, the bigger the deposit, the lower the risk.

Mortgage on a Fixed-Term Contract Main Takeaways:

Fixed contract and agency workers can secure a mortgage.
Lenders will look more favourably on temporary workers with no gaps in their employment history and guaranteed work in the future.
Mortgage providers will have tighter eligibility criteria for those in temporary employment.
Speak to a mortgage advisor before going applying for a mortgage to learn more about your options.

Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.

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How do joint mortgages work? (Sharing a Mortgage)

by Kristian DerrickPosted on 14th July 2019 | Updated 20th January 2023

When more than one (usually up to four) join together to purchase a property they will apply for a joint mortgage.

Each person named on the mortgage are jointly responsible for making the monthly repayments, but not each person has to have the same about of equity.

Furthermore, each person named on the joint mortgage, must sign all the relevant documents, provide information on their income, etc and meet with solicitors.

Who can get a Joint Mortgage?

Many lenders will allow up to four people to buy a property together, and you may hold more than one joint mortgage at any one time.

Take a look at some of the other common situations for a joint mortgage:

Common in the likes of London where property prices are higher, groups of friends band together to buy a property to avoid excesses rental costs.
A family member or friend joins forces with you, as an investment, or to help you get on the property ladder. This is often known as a guarantor mortgage.
Buying a property with a business partner with the goal of putting the property up for rent or to living in it.

How does a Joint Mortgage Work?

As previously mentioned, all those named on a joint mortgage will share responsibility for making the loan repayments.

This means that if one person named on the mortgage stops making the payments, the mortgage company may pursue you to make up the shortfall.

Furthermore, if you want to make changes to your deal, such as borrowing more money or changing the type of mortgage deal, it will have to be agreed on by all parties.

There are two types of joint mortgage:

Tenants in Common

This allows all those named on the mortgage can own legally different shares of the property – equity does not have to be shared equally.

For example, you could have 70% equity in the property and your co-owner could have 30%. Additionally, can leave their share to someone other than their co-owner in their will.

Tenants in common are usually used when family members, friends or business partners join together to purchase a property. A solicitor can draw up a legal document, known as a ‘Deed of Trust’ that details the percentage of the property that each person on the mortgage owns.

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Joint Tenants

Usually used by long-term couples, in a joint tenancy each person on the mortgage jointly owns the entire property, therefore having equal rights in the property.

Therefore, if one borrower dies, the other(s) would inherit their share in the property, even if it has been left to someone else in their will.

If the property is sold, each owner would get an equal share of the proceeds and any profits. Furthermore, if joint tenants are looking to remortgage, they will need to do so together – they cannot get a mortgage separately.

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Can I get a Joint Mortgage with my Parents?

If you have been having difficulties in securing a mortgage on your own, you may be considering asking for your parent’s help.

Having a joint mortgage with parents often increases your chances of being accepted, as the risk has been significantly reduced. Only parents that are financially stable and can afford the repayments should the earnings of their child be interrupted should take on this extra financial responsibility.

Furthermore, parents considering applying for a joint mortgage with their child should be aware that if they already own a property they may have to pay an additional 3% Stamp Duty charge when purchasing the new property.

There may also be a capital gains tax to pay when it comes to selling the property. There are other schemes available with some lenders.

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Can I get another Mortgage if I already have a Joint Mortgage?

Yes, you may be able to get an additional joint mortgage if you already have one with an ex-partner or business partner, etc. As with any other joint mortgage, it will be subject to you meeting a lender’s affordability and eligibility requirements. With an additional joint mortgage, you may be restricted to the amount you can borrow, as a lender will determine the monthly payment you will be able to make, based on your financial information and personal circumstances.

How Much can be Borrowed on a Joint Mortgage?

How much you can borrow on a joint mortgage will be calculated differently between lenders. Each will have an affordability calculator that will determine the amount you are eligible to borrow, based on the income and outgoings of all persons on the mortgage.

However, the amount you are eligible to borrow will be reduced if you are looking for a joint mortgage and only have one income as non-earners will be classed as dependents.

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Additionally, different lenders may consider other sources of income very differently when calculating the amount you are eligible to borrow.

One hundred percent of the likes of bonuses, overtime, investment income may be considered by one lender, whilst only 50% may be taken into consideration by another. Some lenders may also take into considerations certain benefits, such as Child Tax Credits.

To know more about what lenders will take into account in their affordability calculators, get in touch with a mortgage broker that has access to the whole market. In a fraction of the time, it would take you on your own, a broker can find out what you will be eligible to borrow with dozens of lenders.

How do Joint Mortgages differ to Standard Mortgages?

Generally speaking, joint mortgages have the same rates and fees as a standard single person mortgage. However, with more than one person on a mortgage, savings can be combined to make a bigger deposit, which may give you access to better deals.

Typically, mortgages get cheaper the bigger the deposit. The best mortgage rates tend to be offered to those with a 40% or more deposit. Therefore, pooling savings to reduce your loan-to-value ratio by just 5% can result in savings of thousands of pounds over the term of your mortgage.

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Is a Joint Mortgage Right for Me?

Whether a joint mortgage is right for you is completely dependent on your circumstances, and there is a lot to consider, including the likes of:

Whether you are married or in a common-law relationship.
If you want to purchase a buy to let in just one name for tax purposes.
If one of the borrowers has a bad credit history or is not working
If you are looking to buy a better home and two incomes will help you achieve that or you want to borrow as much money as possible.
If you and a group of friends cannot afford to purchase a home on your own, but want to get on a property ladder.

There are so many variables to consider, when it comes to deciding between joint and individual mortgages, so get in touch with a mortgage broker or expert for some impartial advice.

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Getting out of a Joint Mortgage

You can get out of a joint mortgage, but it is not always straightforward. The main two options are selling the property and splitting the proceeds or buying out the other owner.

The Impact of a Joint Mortgage on your Credit

If you have a joint mortgage and are thinking about borrowing more money in the future, you will be subject to credit checks, and the following may show on your credit record:

A financial association with others on your joint mortgage. If they have bad credit it could make lenders question your ability to make loan repayments.
Any money you borrow will show up on your credit report and the amount of personal debt you have may influence what lenders believe you can afford to borrow.
Any missed or late payments on your mortgage, even if they are not your fault, will show up on your credit report, which may affect your ability to borrow in the future.

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