The Impact of Contract Length on Your Mortgage Application
The Impact of Contract Length on Your Mortgage Application
Blog Article
Does Contract Length Affect Your Mortgage Application?
When applying for a mortgage, lenders will consider the length of your contract. The longer your contract, the more confidence lenders will have in your ability to maintain steady income. Contractors with long-term contracts or multiple renewals are often viewed more favorably than those with short-term or fluctuating contracts.
1. Stability vs. Short-Term Contracts
Lenders prefer contractors with a history of contract renewals or long-term contracts. This is because they show stability and the likelihood of continued income. A contractor with a one-year or multi-year contract is typically seen as less risky than someone with a six-month contract or frequent gaps between work.
2. Gaps Between Contracts
While contractors often experience breaks between projects, long periods of no work may raise concerns for lenders. If you have short gaps between contracts, be prepared to explain them clearly. Contractors who demonstrate that they are actively seeking new work or have a solid pipeline of upcoming projects may still have a good chance of approval.
3. What Lenders Look For
Lenders will assess the following when considering contract length:
Contract renewal history: A solid record of contract extensions or renewals is beneficial.
Work history: Contractors with several years of continuous work are often more attractive to lenders.
Future prospects: If you have a history of long-term contracts, lenders may assume you’re likely to secure future contracts easily.
4. Limited Company Contractors
If you work through a limited company, lenders will focus not just on your contract length but also on the overall financial health of your business. Company accounts and tax returns will be important documents in demonstrating stability and income consistency.
5. Seek Expert Guidance
A mortgage broker who specialises in contractor mortgages can help you present your contract situation to lenders in the best possible light. They understand how different contract lengths affect your mortgage eligibility.
Get in Touch
At Contractor Mortgage Solutions, we understand the complexities contractors face. Contact us for expert advice on improving your mortgage application, regardless of your contract length.