A million pound contractor interest only mortgage is not the most simple of mortgages to obtain. The difficult thing is even though contractors are highly specialised within their sector, they have an income stream which is considered inconstant and irregular.
This client was an IT consultant on a day rate of £600 and his annual average salary was £144k. His intent was to secure a million pound interest only mortgage to fund his purchase of a £1.5 million investment property in North London. The client’s main aim was to borrow as much as he possibly could on an interest only basis and he instructed me to find out how much that could be.
He owned a main residence which we were going to use as equity for the new property. He also had £100,000 in savings. This meant to finance the property my client was going to require a million pound contractor interest only mortgage at 75% loan-to value. This shrunk the pool of lenders willing to consider the mortgage considerably as 75% is the highest level of borrowing possible in this instance.
The way a million pound contractor interest only mortgage is typically generated is by multiplying the contractor’s daily rate by 5 and then by 46 weeks in the year. The amount of income this would generate usually dictates the maximum amount it is possible to borrow.
However, I found a lender willing to calculate against 48 weeks, subject to some additional verification checks. By this calculation the amount they would be able to borrow would increase the amount we required for this million pound contractor interest only mortgage.
They were happy to do this for the client. However, we had another obstacle to overcome in that my client only had four months history of working at his current place of employment and the lender needed six months. I persuaded the lender to make a concession in exchange for the client producing a detailed CV of his past contracts. This, combined with my client securing a renewal of his contract, enabled me to make the lender comfortable with my client’s overall profile.
The rate we finalised on was 3.59% for this million pound contractor interest only mortgage. It was discounted because of the relationship we have with the lender. I also persuaded them to asses using an income multiple of 5.5 times my client’s income. This is practically unheard of. I also negotiated the mortgage without early repayment charges (ERCs), so should my client’s position change they would be able to move to another rate and refinance.