Contractor Mortgages Time to Stop Flitting and Offset Instead

Perhaps the single biggest element in anyone’s finances is the mortgage and for the IT contractor, getting a good deal has recently become a lot harder. In October 2009, the FSA effectively outlawed ‘self-cert’ mortgages as part of the plan to appear tough on the banks and encourage more responsible lending. Compared to 2007, when an estimated one third of mortgages required no authenticated proof of income, this represents a substantial change in the lending climate.

We’ve all become accustomed to the convention of securing a fixed rate mortgage for 2-3 years and then renegotiating with a more competitive deal elsewhere. Today, the jobbing contractor may be better advised to go back to the earlier concept of ‘mortgages for life.’ Lenders will be paying much more attention to ‘lifestyle’ factors – how you spend your money, how you conduct your bank account – rather than mere multiples of income. In short, it’s going to get a lot harder to re-finance periodically.

The solution may lie in ‘offset mortgages’ –loans which allow you to reduce the sum you have to pay interest on by offsetting credit balances like rainy day funds, ISA investments and tax money. It could be a lot less onerous to take on a longer-term commitment via a life-time tracker ‘offset’ mortgage than flitting between lenders every so often. And as they’re likely to be available at low interest rates for the foreseeable future, they could well be excellent value. Final tip: always find your mortgage through a contractor specialist. Someone who’s built up sound relationships with lenders and who understands how contractors work will make life a lot easier for you.