It's not uncommon for contractors to have breaks in between projects. Projects come to an end and new contracts can be delayed in starting and some professionals may purposely take a short break between engagements. However, when applying for a mortgage, gaps in the employment record can cause doubts about continuity of income and future affordability.
The positive side is that while there may be a contract gap, it doesn’t necessarily mean the mortgage application will be declined. Lenders have different criteria, and the way your career history is presented can make an important difference.
Lenders want to be sure that you have an income to support your mortgage repayments. Contractors can be assessed differently from permanent staff because their income may depend on fixed-term assignments, day rates or project work.
A gap between contracts can then cause a lender to consider your employment history, your current contract and your income and your future job prospects. However, lenders may also recognise that experienced contractors can have established careers despite occasional breaks.
No one fits the bill when it comes to the acceptable gap for each lender. There may be lenders who are willing to wait a short time between contracts, especially if the applicant has a solid record of returning to their trade.
Several gaps may not be as significant as the general pattern. A contractor with many years of experience, frequent contracts and proof that their services are still needed could be a more solid application than a contractor with little experience in contracting.
More recent AWS Private Finance studies also show that even if employment conditions change or are short or without income, it is not necessarily incompatible with a mortgage being arranged when the case is matched with a suitable lender.
A solid, consistent work record can help fill in any employment gaps. Do not just list your current contract's dates; include all the information about your professional history.
This can include previous contracts, roles, contract lengths, day rates and the industries in which you have worked. State the continuity if it has been a period of several contracts in the same profession or sector.
This is especially helpful if you have recently finished your contract or are nearing the end of your contract. When the overall application is good, any evidence of a new contract, extension or potential future contract will enhance it.
The earning history and/or earnings should also be presented in a manner that is representative of your earning history. It is important to note that some lenders take the income on the contract or day rate, and others may vary depending upon how you are paid and your employment situation.
Having good credit, keeping your financial records tidy and avoiding any transaction that might be unexpected will complement your application further.
Every lender has its own standards for evaluating contractors. Some lenders may not like a specific employment gap, while others may look at the broader employment history and future income.
Therefore, it is crucial to select the right lender when applying for a contractor mortgage. A specialist broker can assess your situation prior to applying and discover lenders who will certainly have a much more favourable perspective on your contracting background. AWS Private Finance has been working with lenders that accept various contractor income structures and employment patterns.
When lenders are not looking for a contractor with immediately available projects, there are still mortgage opportunities available if the contractor has a few days between assignments and is prepared. An expert can assist you in getting your career path and earnings displayed in the best possible light for you.
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