Mortgage Secured for Day Rate Contractor Paid in Euros

Having previously been turned down twice for finance after going direct to a lender and then using a local mortgage broker, our client approached us for help. 

Sceptical at first with our confidence in being able to find him a mortgage, this client was in disbelief when we came through with an offer just two weeks later. 

So, what did we do differently? And why was he struggling in the first place?

The Scenario 

Our client was looking to buy a £611,000 detached house in West Yorkshire. He was looking for a mortgage of £488,000, which put his loan to value at 80%.  

But the main stumbling block with his application was his income.  

As an IT contractor compensated in Euros on a daily rate, lenders had differing perspectives on his income. 

Firstly, while a day rate can be more lucrative for contractors, it doesn’t always translate pound for pound in your mortgage borrowing potential - it depends on the lender. 

While it’s arguably reflective of your net income, it’s not necessarily reflective of your true income potential as a day-rate contractor.

But there are some lenders that use a different calculation: 

• Your day rate x 5 (days in the week) x 46 (weeks in the year accounting for holiday and sickness).

This typically adds up to a much greater annual income.

The onus is then on you to make sure you’re taking enough income from your limited company to keep up with your mortgage and other expenses, regardless of how much tax you’ll be paying. 

For our client, the only way he could borrow enough was to apply with the right lenders. But he also needed to know their stance on foreign currency earnings, all while pushing the loan to value limits at 80%. 

And finally, our client wanted interest-only flexibility with their day rate mortgage.  

He received a healthy annual bonus through his work, so wanted to repay chunks of his mortgage as and when he had the cash to do so further down the line.

The Solution

Our broker went to 7 or 8 lenders he knew could look at contractor income in the right way for our client. He then liaised with their BDMs to see if he could get the application through with the income in Euros, while also factoring in an interest-only portion of the mortgage. 

Our only compromise for the client was bumping the LTV down to 75%, simply because the deal wasn’t possible without it.  

The final product consisted of a 25% part-repayment mortgage and a 50% interest-only mortgage, giving our client maximum flexibility to fit around his self-employed income structure and annual bonuses. 

Impact

Prior consultations had left this client disillusioned, having been informed by another broker it wouldn’t be possible to secure a mortgage due to being paid in Euros. And had the client not engaged our services, they may have been looking at a much smaller borrowing figure, losing out on securing their dream home in West Yorkshire.  

Needless to say, they were immensely grateful for our help, and we think this case is a great example of why speaking to experts that really know their industry is so important, especially for significant and complex life decisions such as buying your home.