The press has been full of stories about the future of the Landlord sector and on current trends we predict that home rentals could account for a massive 15-20% of the entire housing market by 2020. Current conditions represent a great opportunity for those savvy Contractors who can purchase now as a long term investment.

Many Contractors choose to build a property portfolio in order to supplement their current and future income, perhaps providing a cushion in the event of suffering a lower contract rate or time between contracts. Others clients have gone on to  build very substantial portfolios  numbering 30+ properties and have given up contracting altogether whilst another type of investor has simply looked on their buy to let as a home for  long term savings to help fund future retirement alongside a more traditional pension plan.

Buy to Let mortgages for Contractors

Funding an investment property purchase is different to our home owner contractor mortgages because affordability is calculated on the rent that a likely tenant will pay rather than just you, the borrowers, income. Typically, the rent needs to account for 125% of the monthly mortgage repayment on the property so choosing a property wisely is the best way to ensure your application is successful. A good location, reasonable purchase price and high local demand should all equal a healthy rental ‘yield’ over and above the mortgage payment. The fact that the income proof required for a buy to let mortgage is calculated in this way will mean that your contract income will have less of an impact on your application but your day job will still need to be represented in as good a light as possible and this is where we bring our expertise to bear.

High street lenders have long been accused of being out of touch with the contracting sector and often continue to offer traditional “thanks but no thanks” responses to contractor mortgage applications when you apply direct. However, ContractorFinancials have worked tirelessly to gain access to a range of products from these same lenders, which are individually tailored to the particular requirements of those working in the contracting sector.

Our Service

Our qualified mortgage advisers here at ContractorMoney, specialise in offering High Street mortgages to contracting professionals. We also charge you none of the usual fees for our advice which will typically save you between £500 and 1% of the purchase price.

“There has been a recent increase in demand for buy to let mortgages, from Freelancers” says adviser Lisa Merriman. “With a 25% deposit, contractors can secure very competitive rates of around 3.5% on a 2 year tracker mortgage and some lenders even offer up to £500 cash back to clients on completion”.

“Even if you have a larger deposit, using a mortgage can be a great way of reducing the tax liability on rental income received as opposed to buying outright or putting down more cash. It also means that you won’t be committing all of your savings.” She adds.  “Various costs can be offset against profits and income and we will be on hand to help along the way.. We appreciate that contractors are incredibly busy people and may not have time to meet in person. We can offer support through phone and email which saves our client’s valuable time and means that you can get cracking with your offer on the property without a delay that could allow another buyer into the frame.”

To talk to Lisa or one of our other qualified mortgage advisers about how a buy to let mortgage may benefit you, call 0845 066 8888 or fill out a contact form on this website.

As IFAs we are uniquely focused entirely on our Contractor clients and pension investment represents one the very few non-contentious tax breaks still available to you so many  were very disappointed when these new rules came out last year. Thankfully an old pensions phrase was reintroduced to our lexicon as ‘carry forward’ allowed the member to utilise unused allowance from the three previous tax years based on the new £50k cap. An example of this would be:

08/09 – £30k investment – Carry forward is £20k
09/10 – £20k investment – Carry forward is £30k
10/11 – £80k investment – Carry forward is minus £30k

Available carry forward of unused allowances is £20k, with the maximum contribution being £70k for the current year if we add your normal £50k allowance.

As the investor has invested £30,000 over the allowable in the 10/11 input period this will have subsequently reduced the available additional investment possible.

However, the rules were revisited by the HMRC late last year and have now been amended which could work out very lucrative to pension savers, especially contractors who are looking to reduce their tax burden and regardless of whether they are caught by IR35 or not. The new rules will nownot incorporate any overpayment in past years, so based on the above example the investor would actually have an additional £50,000 as the 10/11 tax year would simply qualify as a zero figure. If we then add your £50,000 allowance you have a maximum of £100,000 investment open to you.

Contractor Pensions

As you can see, with specialist advice the new allowance need not stop you achieving the tax breaks you seek whilst also boosting your income at retirement. The tax savings shop window is still very much open for business and with tax year end round the corner / company year end on the horizon,  this could be the perfect time to take advantage of the new rules and put in place some effective financial planning from your Contractor Specialist IFA.

If you would like further information on this and our range of flexible Contractor Pensions then please contact Andrew Gains who is one of our qualified advisers at ContractorMoney on 0845 066 8888 or fill in a contact form on this site and we will be more than happy to help.

A new Contractor Keyman insurance that we have helped trial last year allows you to fund life insurance direct from your business account, with no income tax or benefit in kind to pay. The premiums should also be ok to offset against your companies corporation tax as a legitimate business expense.

Thanks to a tax efficient trust arrangement you protect your loved ones in the same way as the death in service benefits that you benefited from when you were a permi, whilst saving significant amounts of tax compared to paying for cover from your personal bank account.

In addition to these obvious tax savings, benefits shouldn’t be liable for inheritance tax in the event of your death either.

As well as insuring yourself, any employees (perhaps your Spouse is Company Secretary?) receiving a salary can be protected too. Often it’s all too easy to think about only insuring the main bread winner but with the costs of child care etc rising fast, the loss of a home-maker can be disastrous too.

This cover is flexible enough to accommodate future changes to your employment status because it can be altered to a personally funded plan in the future if required. This feature is vitally important in case you suffer health problems that could make you uninsurable in the future. Protection can be provided until your 75th birthday and can be adapted as your needs change.

Our award winning experts are on hand

As Independent Financial Advisers with well over a decade of experience in advising Contractors we compare the providers that are able to offer this type of policy to ensure that the policy is cost effective for you. We will also painstakingly complete the all important trust documentation on your behalf to ensure that you gain the maximum tax benefits, will help transferring the policy to new trustees if needed in the future and of course will do our best to aid your family in coping if the worst should happen and they need to claim.

We understand that, as a Freelancer, your time is precious so we have streamlined our advice process as much as possible to ensure that you can arrange your policyr with a minimum of time and effort needed on your part. Our award winning protection advisers will discuss your needs via email and phone and will ensure the application is successfully completed and you gain the cover as soon as possible. On receipt of your policy documents you will also know that, compared to personally funded policies, the taxman is now helping you fund that all important protection for your family.

Please contact Catherine Young who is one of our qualified advisers at ContractorMoney today on 0845 066 8888 for more details or fill in a contact form on this site.

Being a contractor or freelancer is not really easy. Chances of getting a housing loan to be approved are very rare when one don’t have necessary papers to present such as monthly income slips. And securing one’s own house can be a challenge. Good thing there are people who understands the job situations of contractors and freelancers. The lack of right papers to present and lack of fixed monthly income have incapacitated contractors and freelancers the ability to attain financial freedom in terms of borrowing money from the street bankers—but it’s a different story now.

Contractors and freelancers can now avail the financial assistance they’ve been waiting to have: contractor mortgages. Purchasing a home has been one of the first priorities for majority of people working, and contractors are among these folks. The housing market has become very accommodating to new buyers that the prices of houses have dropped. This can be linked to the continuous drop of new investors entering the housing market in UK and higher outright costs of buying a home—and, hopefully, it would be a different story now.

In spite of the housing market’s constant improvements since 2008 to make buying more affordable than renting, its number of buyers has continued to drop. An approximate of 510, 000 homes have been purchased in 2011—6% lower than in 2010—through a mortgage. Since 1974, it is the lowest year total. The higher amount of deposit required—which is more than the sum of two deposits in the last years—is considered to have contributed to the continuous decline.  Besides, increasing costs involved in moving home—such as estate agent fees and stamp duty charges—have added further burden to home buyers.

Purchasing a home, however, is still cheaper than renting. One can evade the holdups of fluctuating UK economy and higher required deposits for home purchase through a contractor mortgage. Recent improvements in the housing market are geared toward in favour for home buyers. If one would ask for the right time to purchase a home, “now” is definitely the answer. And through a contractor mortgage, contractors or freelancers should not worry of losing the chance of securing a housing loan. Finding the right people who have strong connections with senior underwriters is the key to getting a contractor mortgage fast at its lowest interest rate.

The same study also showed: (1) there are 31% who don’t exactly know their mortgage interest; (2) there are 43% who don’t have any idea of their mortgage total cost; (3) and a quarter of the total respondents don’t know if they are overpaying their mortgage. For a contractor or a freelancer, not knowing the details of one’s standing contractor mortgage is very risky. Granting the fact of not having a predictable flow of income, a freelancer or a contractor may end up having overdue monthly contractor mortgages—which is considered a bad credit history.

The study further showed that there are 25% who don’t know if they are allowed to have their mortgage overpaid within a certain period of time, while the other 15% are unaware of their mortgage’s outstanding amount. Having these specific knowledge deficiencies in one’s standing contractor mortgage can hinder flexibility in paying his or her mortgage. Owing to the nature of earning one contractor or freelancer has, overpayment of mortgage has its benefits such as diminish recurring mortgage interest.

Although the result of the study concluded that the number of borrowers overpaying their mortgage is only half the number of borrowers regularly saving in their account, the hypothetical question of how they would use any remaining money has revealed a different one. There are 48% who would overpay their mortgage, 42% who would increase their regular saving deposit, and 33% who would use their spare money to pay off their bank credit cards. Finding among these three the best option to pay less and save more may vary from one situation to another. For contractors and freelancers, flexibility of payment is the keyword for the type of mortgage they need.

The research has drawn further enlightenment in the relationship between savings and mortgage cost. Balancing saving against mortgage, borrower can dramatically lower the cost of his or her mortgage payment at approximately £28.25 per month while still having access to his or her savings should the need arises. This is exactly the type of mortgage loan a contractor or a freelancer really needs. Paying less interest while not worrying too much for any emergency scenario to occur should be the type of mortgage payment contractors and freelancers should be having. This ultra-flexibility of payment is only achievable through offset mortgage.

Senior Mortgage Manager Richard Tolchard of First Direct stated the benefits a borrower can have with an offset mortgage loan. Based on the result of the study, freelancers would choose to put their spare money to savings while half would overpay their mortgage, offset mortgage can provide a benefit in both sides. An offset mortgage allows contractors to lower down their monthly mortgage interest while keeping the flexibility of accessing their savings account anytime.

Also, the study found out that gender and age are two important factors affecting knowledge and view of their mortgages. Except with the specific limit of overpayment, the study noted that men are more conscious of almost all aspects of their standing mortgage. 63% of men are aware of the total cost of their mortgage, much higher than the 52% of women. This finding, however, may not be that relevant to produce a top-notch option for freelancers and contractors on how to make most of mortgage loans available to them. But, of course, this part of the study can be used to remind female contractors to be more conscious regarding the details of their mortgage.

Furthermore, 86% of the age bracket 25-34 has been shown to put their money more on their savings account, while 62% of ages 55 years and above consider or do the same. This suggests that the younger 25-34 age group is more aware when it comes to money matter. Next to the 24% of 45-54 age group, 22% of the 25-34’s have higher probability of overpaying their mortgage. In the study, they have the highest probability of considering overpaying their mortgage at around 51%; this is significantly higher than the 35% of the 35-44’s, 33% of 45-54’s, and 24% of 55 and above age group who also consider overpaying their mortgage.

The study clearly shows that different type of people—having different gender and belonging to different age group—have their own preferences when it comes to money. And for contractors and freelancers, flexibility in their mortgage payment is very helpful. Contractor mortgages offer a variety of ways to contractors in terms of loan payment. Doing one’s homework and research does help one find what he or she really needs. Securing contractor mortgages and paying of one’s mortgage loan is not really a problem once you have the right people.

 The Chancellor has given his backing to plans that could see the Bank of England and it’s Financial Policy Committee (FPC) empowered to place loan to value caps on all mortgage borrowing. As contractor mortgages are typically seen as high risk, and already subject to more stringent control by individual lenders, they are likely to suffer further restrictions as a result of any legislation passed.

 The global fiscal crisis has hit theUKmortgage industry hard, with first time buyers making up less than 25% of the market. This is a direct result of current loan to value rates, which are preventing many from being in a position to buy. Before the recession struck, many borrowers were able to borrow money to the value of their home, or more, with low deposits. The result of this excessive borrowing in previous recessions was a large number of people finding themselves in negative equity, financial difficulty and even facing bankruptcy although figures suggest the impact has not been so great this time around.

 Contractors and freelancers are victims of the current economic situation, as contractor mortgage applications and loan to value rates are scrutinised to a much higher degree than those from other applicants. Typically the loan to value rate for a contractor is likely to be higher than that set for other buyers. Bank and Building Society branch staff and more mainstream mortgage brokers often don’t understand or appreciate the contracting or freelance industries, and prefer to deal with ongoing permanent employment contracts, even where wages are lower or less well defined.

 IT Contractors, Engineers, Oil and Gas professionals, , writers, architects and any other freelance business people may find that they are penalised unfairly due to the fact that they have many short term contracts, no definite income pattern, and have produced their own set of accounts. The proposed Bank of England powers would limit lending in all high risk sectors, and would no doubt increase the difficulties already faced by these applicants

The retail price indices (RPI) were noted to be a little higher at 4.8% the moment the rate of consumer price indices (CPI) lowered down to 4.2 % in December. In November 2011, the retail price indices were noted to spiral downward to 4.8 % from a fluctuating 5.2%.

The last time there was a major drop in the yearly inflation was recorded somewhere in the middle of November and December 2008; that was the time when VAT was cut.

According to the Office of National Statistics, Clothing, Gas and Petrol were the biggest pressures pushing consumer price indices downward, while the mobile phone and landline charges were the only significant factors pushing CPI upward.

With lightening news in the economy, now could be the right time to make that all important house purchase. If you are contractor and looking for a great deal on a mortgage – speak to one of our friendly team today!

Traditionally, protection policies are priced based on a number of health questions, with the emphasis on determining the risk of death from health related factors such as diabetes, heart attack and cancer. However, with the most common cause of death in 20-30 year olds now a road accident, the emphasis is shifting.

Insurance provider Axa is predicting that in future, lifestyle questions such as how many points you have on your drivers licence may play a bigger role in determining how much you pay for your insurance premiums and which companies will cover you. The application process is also likely to become more specific to age groups and younger generations in particular will be judged on lifestyle choices rather than the overall health profile of the entire population.

Other factors such as your postcode, your occupation and your income may also become more important in the future. For Contractors, this may cause significant problems if providers see your occupation as a risk and as such seeking advice on which providers will be open to your application will become even more important.

Already our protection advisers can access a policy that discounts your premiums based on gym membership and how active you are and increasingly insurers are understanding that if they can influence and reward behaviours then the next result can be the archetypal win/win.

At Contractor Financials we specialise in providing Independent Financial Advice to Contractors and our protection team are experts at finding the right cover to suit your needs.

New figures from the Land Registry show house prices increasing by 1.7% to £155,885 in August which is the highest monthly increase since 2004. Prices have increased now for the fourth month in a row and mortgage activity increasing.

The tables seem to have turned over the summer with demand now far outstripping supply as cautious homeowners keep their houses off. There has been a steady increase in buyer confidence in recent months, with potential homeowners hoping to snap up a bargain and this is pushing up the prices.

If you are selling your house then this is great news as there are more potential buyers out there. However, be prepared to receive offers as many buyers are still hunting for a bargain. If you set a minimum price in your head and price your property competitively then you should have no problem selling and moving on up the ladder.

Any concessions that you have to make in your own sale should be mirrored the price you pay for your own purchase because you too will have increased bargaining power. As the value of the new property will undoubtedly be greater this should mean that you benefit to an even greater extent than your purchaser.

Ironically even if you are a first time buyer there are positives to rising prices. With increased interest and stability in the housing market comes an increased appetite for lending as mortgage companies see less risk in first time buyers and existing homeowners alike in a rising market. This means that it should become easier for first timers to get a mortgage and the continuing low interest rates should help to keep your monthly repayments down if you are on a tracker rate.

So with some real positives filtering into the housing market the other big dilemma will be whether to consider a fixed rate mortgage in anticipation of the base rate increasing. Our own belief is that base rates are unlikely to gallop ahead in the near future and so tracker deals look good value in comparison with more expensive fixed rates.

Whatever type of mortgage you decide to choose, our expert advisers are on hand to help you through every step of your mortgage application and to make sure you get the right mortgage to suit your needs.

When you leave the shackles of permanent employment behind to begin life as a Contractor, you should hopefully have the ability to earn significantly more money for your time. This extra income is all too often absorbed by increased outgoings as you take on a mortgage etc and this can often leave surprisingly little scope for investment. We are, however, living through unprecedented times and many clients have seen mortgage costs plummet and household bills dip due to the fall in inflation and all this means that many should have spare funds to put aside each month and save for a rainy day.

The question of what to do with this excess income can be tough and in a recession it is easy to fear investment as a rocky road best left to the experienced. There are opportunities for gain for even the most inexperienced of investors but you just have to know where to look…

Don’t put all your investment ‘eggs’ in one basket

The key to investing during the recession is to spread your risk with a diverse portfolio. You should decide how much risk you are willing to take and choose your assets accordingly and spreading your investment over a number of sectors is wise in order to maximise your potential returns.

You might want to consider investing in different areas such as equities, fixed interest, corporate bonds and even commercial property. Its also vital to ensure that you aren’t solely focussed on what may turn out to be a relatively sluggish UK economy but whatever you decide to invest in, drip feeding your contributions can help to minimise the risk to your investment as any gains and losses are spread out over time. This is far better than trying to time the market which can prove impossible for even the most experienced investors.

Grab the ‘bull’ by the horns

Experts are predicting that we are now out of the bear market and since March have entered a run away bull market, where the stocks and shares that fell heavily during the fallout of the credit crunch begin to grow in value again. It is widely believed that the first shares to fall and the ones that fall at the fastest rate in a recession, are the ones to grow again and at the fastest rate when we come out the other side.

As such, investing in industrials, materials, emerging markets and consumer discretionary stocks could see the highest returns over the coming months. Investing during what must still be classed as a recession, is not for the faint hearted so you should only invest what you can afford to lose and you should be prepared to focus on the long term. Therefore, keeping some cash aside to cover any unforeseen needs in the short term is a must in order to fully benefit from your investment.

Invest in a pension – less risk and tax savings galore

One of the most beneficial ways to spend it would be to invest for your retirement in a tax efficient pension as you get a bigger bang for your buck by virtue of the taxman boosting any money that you set aside.

As a Contractor, tax is the thorn in your side and making the most of any tax breaks offered by HMRC is essential. Since pension simplification came into play in 2006, Contractors have been able to invest almost all of their annual income in a pension each year with no Income Tax and National Insurance contributions or benefit in kind implications. This represents a very effective means of transferring money from contract into personal hands whilst also helping to ensure financial security in your retirement.

If the idea of not being able to benefit from your savings efforts until retirement has put you off contributing large sums to your pension in the past, then you may be interested to know that you can release funds from your pension early. Contractors aged 50 or over (55 or over from April 2010) can draw a quarter of your pension fund as a tax free cash lump sum although there are a number of factors to consider before deciding to do so as it will affect your income in retirement.

Ask the experts

If you find yourself with money to invest but you don’t know how best to use it to get the returns you want, then help is at hand. Our expert pensions and investments adviser Andrew Gains and Richard Braid can help you to make the most of your Contractor income, with independent financial advice on a wide range of investment options.