3 Simple Mortgage Tips for Contractors

1. Always Use a Contractor Mortgage Broker

Many contractors are convinced that they can secure mortgage on their own without the assistance of a contractor mortgage specialist. This attitude quickly changes after they have approached several banks only to be declined. The problem lies with many local bank branch staff or call centres. There's nothing worse than being told by some young graduate quoting their standard script that you can't obtain a mortgage because you have insufficient income to support the mortgage loan you are applying for. Or a call centre based in Delhi who simply don't understand your employment status as a contractor. Unfortunately, they are not trained to understand the contracting environment that you work in let alone the trading structures and payment mechanisms that contractors use. So if you're fed-up of being asked questions that have no relevance to your employment status, like employer's details, evidence of time employed, pay slips and so on, our recommendation is that you contract a contractor mortgage specialist who has experience arranging contractor mortgages.

2. Secure a contract based on your contract rate

If you're fortunate enough to find a lender that doesn't flinch after you've told them that you're a contractor, they will then want to assess your affordability using their self-employed criteria for Limited company directors. This means that they will want to assess your mortgage borrowing based on a narrow measure of your director's remuneration, which may not fully reflect the total earnings that you have at your disposal. They will need to see three years accounts, which exclude contractors who haven't been working long enough to produce three years audited accounts. For those contractors that can provide three years accounts, they will be assessed on the physical drawings they are taking from their limited company, not taking into account retained profits.

Most contractors who operate through their own limited company don't draw all their annualised income in salary and dividend drawings. For tax purposes, it makes no sense, instead the majority of contractors operating in a tax efficient way draw a minimum salary and also restricts dividend drawings to avoid higher rate tax. While this makes perfect sense from a tax planning perspective, it has the undesired effect of reducing the amount that contractors are eligible to borrow under the standard criteria used by most lenders.

Contractor mortgage specialist have worked hard over the past 10 years to develop strong relationships with high street banks in relation to simplifying what qualifies as relevant earnings for lending purposes for contractors. They have been influential in changing the underwriting criteria for contractors.

There are a now a number of high street lenders that will provide mortgages for contractors based on gross contract earnings. The mortgage loan can be as much as 4-5 times your annualised contract earnings. This means that you don't have to rely on the traditional method of using accounts.

In order to calculate how much you can potentially borrow based on contractor based underwriting, you need to multiply your daily contract rate by the number of days you are working in a week followed by 48 weeks. In most cases you can secure a mortgage of up to 4 times this figure. For example, a contractor on a daily rate of 500 can potentially borrow:

500/day x 5 days x 48 weeks then multiply the product to 4 = 480,000

The following documentation is required to package a contractor mortgage application:

1. You current contract stating your daily/hourly rate of pay
2. C.V outlying your skills and experience
3. Completed "Fact Find" Questionnaire (mandatory for all regulated mortgages)

3. Maintain a good credit score

Many contractors don't realise the importance of maintaining a good credit score. This score may be the difference between the lender accepting your application or declining it.

The first step of the mortgage process is obtaining an "agreement in principle". This involves the lender carryout a credit search on you to determine your credit score.

Irrespective, of whether you can put a large deposit down or even large income, lenders will still decline your mortgage application if your score is poor. The current economic client has forced lenders to tighten their criteria and to cherry pick those applicants with good credit scores.

So ensure you keep a clean credit history to avoid giving the lender an excuse to say NO.

You can you ensure that your credit rating is good by observing the following steps:

• Ensure you are on the electoral roll register with your local council
• Don't apply for lots of credit in a short space of time e.g. mobile phone contracts and credit cards. This will leave a footprint on your credit history.
• Cancel any credit cards that don't use and try and pay off any existing debt.
• Paying your bills on time is critical as lenders hate to see late payments.
• If you don't have a credit already, then get one. Banks need to see that you have a history of successfully managing credit - staying within your limit and making payments on time.

Home Equity Loans With Bad Credit: These Three Steps Will Get You Ready

The economy is in a less-than-perfect place right now, leading many people to have a hard time paying their bills and making ends meet. For homeowners with bad credit, home equity loans can provide a certain amount of relief that may be the difference between making through another month and falling into financial ruin.

Getting a home equity loan with bad credit is both easy and possible when looking in the right places. For a home owner, using this lending option to get cash in a pinch can be the best choice. However, there are important steps that you will need to follow before getting a home equity loan.

Step One: Talk to Your First Lender

The lender who first extended you the loan for your home should be your first stop when beginning this process. You need to talk to him about the money you still owe on this loan as well as the possibility refinancing instead of looking for a home equity loan, commonly called a second mortgage. Basically, the refinance may free up money for you and will prevent you from having to pay two loans each month instead of only one. The state of your credit - that is how low it actually is - will largely determine whether or not this is a possibility.

Step Two: Have a Credit Check

Most people with so-called "bad" credit may not understand what that means or where it comes from. Before you look for a home equity loan, understand what your credit score means and where it came from. This involves looking at two different pieces of information: your 3-digit credit score as well as your full credit report.

The credit score that you have is a number that falls between the numbers 300 and 800. Those with a score below 650 are then labeled as having bad credit, which can affect the terms of a home equity loan as well as your ability to secure one in the first place. Taking time to build up your credit score can really help in getting you a loan with good terms.

The other element that needs to be checked is your credit report. This is a detailed record of your assets, debts, and past repayment history. This will show you what is pulling your credit down and hopefully help you formulate a plan to make your bad credit improve. As an added bonus, doing this credit check will also allow you to look for potential errors that could be impacting your score.

Step Three: Research All Your Options

When looking for a bad credit home equity loan, borrowers need to make sure that the lenders they work with have a good reputation. Using the Better Business Bureau to research their history before making contact is a great start. This way, you know that the lender has been successful before and can hopefully extend you a good deal. Making sure that the lenders you contact run proven, legitimate business will have a direct positive effect on the loan that they can offer.

Finding the Home Equity Loan

Once you have all of these steps completed, getting a home equity loan with bad credit will be far easier. Make certain that you know who you are working with and what your options are to get the best deal possible.

Can Stonehaven Replace the Halifax Retirement Home Plan With Their Interest Only Lifetime Mortgage

Following its withdrawal in August 2011, the Halifax Retirement Home Plan has certainly left a gaping hole in the pensioner retirement mortgage market.

Pensioners, who were proposing to use the Halifax Retirement Home Plan at a future date, unaware of its impending withdrawal, have now had their retirement plans severely disrupted.

Enquiries are still being received from retirees looking for a pensioner mortgage which can be used for a variety of lifestyle solutions.

With options from moving house, to holidays, gifting to children & home improvements, there has been a significant reduction in the interest only mortgage options available.

So why was the Halifax Retirement Home Plan Withdrawn?

Enormous demand for the Halifax Retirement apparently consigned the product to its own demise. Success is not usually associated with dramatic failure, but it seems the Halifax Retirement Home Plan was in this case, a victim of its own success.

Given the volume of applications Halifax was receiving, even a lender the size of Halifax was struggling with such popularity. Towards its latter days the Halifax back office systems were choking, solicitors being incorrectly instructed & timescales reaching unacceptable levels, so much so that Halifax have actually compensated clients due to administrative errors.

Reasons for the Halifax Retirement Home Plan's Popularity

Since the products start in July 1984, the Retirement Home Plan lay hidden in Halifax's mortgage book for many years.

However, certain intermediaries specialising in equity release, then understood the product had a role to play in providing best advice & offered an alternative to roll-up equity release schemes.

Not everyone is suited to a lifetime equity release scheme where the interest rolls up & compounds annually for the rest of their lives. Roll-up schemes to some pensioners can prove off extremely off-putting, with the balance about doubling every 10-11 years. The result & the impact of the compounding of interest will be that their beneficiaries will receive a significantly lower or completely eroded inheritance.

Therefore, for retirees who did not want this scenario, the interest only lifetime mortgage proved an excellent alternative. Obviously supported by a good secure disposable income, the Halifax monthly mortgage payments could be fulfilled, with the result of keeping the mortgage balance exactly the same for the rest of the mortgage term.

However, the doomsday scenario did eventually arrive & the Halifax Retirement Home Plan was pulled on 17th August 2011 at very short notice.

Regulation & the FSA Effect

With the FSA (Financial Services Authority) now imposing stricter regulation on interest only mortgages, this has affected the whole post retirement mortgage market.

Regulation here should be reviewed & consideration given to the plight of pensioners.

Over 60's looking for finance have fixed income for life -

They are already drawing their state, private & occupational pensions.

They are therefore in receipt of a guaranteed income for life.

They can't be made redundant, be off work due to sickness or take maternity leave!

Additionally & historically the retired generation of today have a different attitude to credit & tend to err on the side of caution. They have benefitted from house price booms of the last decades & so on the whole have a great deal of equity in their properties.

From a lenders perspective you can't get much better security than this?

So why are the over 60's being penalised?

After discussions with various lenders their defence has supposedly been the fragility of repayment. Considering monthly mortgage payments are paid by direct debit & pensions & retirement incomes are paid directly into the bank account, this doesn't seem to hold true?

The distinction should be therefore be made between the people pre retirement & those post retirement with regards to interest only mortgages.

The FSA has understandably clamped down on first time buyers & mid-life mortgagors taking out interest only mortgages with NO repayment vehicles. However, this has been to the detriment of pensioners whose cause has been undermined.

So for now we have to accept the level of caution in the mortgage market. However, moving forward consultation & consideration should be given to this corner of the mortgage market as it can have added benefits to a fragile economy. The reason being is that pensioners releasing equity in retirement do so mainly for lifestyle reasons:-

· home improvements

· deposits for the children

· holidays

· new car/caravan

All these expenditures for one reason or another will help boost both the local & national economy.

What Interest Only Pensioner Mortgages Are Currently Available?

The aforementioned issues have arisen with the tightening of interest only criteria. Lenders will now insist on most mortgages expiring by age 75 & this will usually have to be on capital & repayment basis. More often than not this will result in the monthly cost being prohibitive, as paying off a mortgage of £50,000 over a short-term of say 10 years can be out of most people's affordability levels!

Nevertheless, a specialist equity release lender has analysed the situation better than most & hence we unveil the Stonehaven Interest Select Plan.

Offering SHIP security & choice as to the size of the monthly contribution, Stonehaven have covered all bases. This interest only lifetime mortgage provides lifetime fixed interest rates starting from just 6.13% thereby offering affordability now & into the future. With pension incomes rising over the years, but the monthly mortgage payments guaranteed to remain the same, the Stonehaven interest only equity release plan provides protection from future increases in interest rates.

However, it doesn't end there because if financial difficulties do arise then there is always the option to switch it over to a roll-up equity release plan with Stonehaven. No further payments are then required & dependent upon whether the switch was planned ahead or not, will decide whether an extra 0.2% is added to the rate. Stonehaven are members of SHIP & regulated by the FSA.

Rumour has it that niche lenders are now starting to look into pensioner mortgages & eyeing business opportunities, so there does seem to be light at the end of the retirement rainbow.

About The Author:
Mark Greggs is the founder of Equity Release Supermarket who have been previously been accredited 'Best Financial Advisers' at the Equity Release Awards.
Mark is an experienced Independent Financial Adviser who has now been providing quality equity release advice for the past 12 years.
Gained with this experience is exclusivity to deals with some of the UK's leading financial providers.
Mark aims to pass on his experience in assisting the over 55's decide whether equity release is the right choice for them & what alternative options are available.

Home Equity Loans and the Toxic Relationship

Love is like a magnet that brings a couple together. However, on its own, it's rarely strong enough to maintain the bind. It's a sad but true statistic that the majority of North American marriages end in divorce. And for those who are still together, it is often not the fluttering of hearts that keeps them united - but other obligations, like children, finances, joint business ventures and home ownership.

Buying a home is a major investment. Next to children, it is probably the biggest decision a couple will ever make. Income for decades is dedicated to the mortgage payments, and countless weekends are lost to renovations and repair. It is a labour of love, and for many married couples, next to children, this incredible investment of time and resources is what keeps them together.

It's a tragic situation, when a bitter couple is still together for no reason other than to finish the mortgage they started. The thinking is that once the house is paid off, they can go their separate ways. In their reasoning, only then will the business venture, like the love, will be finished.

This leads to a toxic relationship. The couple's anger, resentment and loathing becomes intensified because they must interact with each other every day and continue to feed the seemingly endless appetite of their shared home.

While one partner may be ready to leave immediately, financial worries may haunt her if the house is not liquidated. She can feel helpless and impoverished. Paralyzed by money concerns, she stays put, in an unhealthy environment - which is more detrimental than anything.

What couples need to understand is that the money they put into their home can be accessed at any time by means of a home equity loan. Instead of waiting for the mortgage to be paid of completely, they can have access to the equity they have accrued over their years. This is an excellent way to get large sums of money in the event of an emergency - such as a domestic situation that is getting ugly.

If credit is an issue, private home equity loan lenders can offer loans that are not dependant on age, credit or income. If the couple owns their home, they can get access to the money they need - fast - without selling or dealing with the hassles of the banks.

Approval can come as fast as 24 hours if one goes with private lenders of home equity loans in Canada.

If the magnetic pull of love has lost its power, and its only money that's holding you together - perhaps it's time to cash out and start anew. There are always second chances in life.