The Difference between Contractor Mortgages and Regular Mortgages

Both mortgages have been around for decades, and so is the above question. While most employed individuals can secure a regular mortgage approximately 2-4 weeks after the submission of requirements, contractors and freelancers may not be able to do so with a regular mortgage—even if they spend a month or so processing their mortgage loan application. The main difference between contractor mortgages and regular mortgages is the essential requirements a borrower needs to present to the lender or bank. Specifically, regular mortgages require one to have a fixed monthly rate and a property, which will serve as collateral, to secure a mortgage loan. Contractor mortgages, on the other hand, require one to just present a signed contract and a furnished mortgage note.

Basically, one can bag a regular mortgage loan based on his or her monthly income rate, amount of deposit, and value of his or her property. These are simple requirements to accomplish for an individual doing an 8-hour office job who receives a fixed salary every month. But for a contractor who bases his or her income for the number of contracts per year or a freelancer who receives a different income per month, the three mentioned requirements prove tough to accomplish; thus making regular mortgages not a sound choice for securing a loan. Until the birth of contractor mortgages, getting a loan approval had been almost impossible for contractors and freelancers.  

Contractor mortgage loans can be approved for freelancers and contractors as fast as 2-4 weeks. The interest rate for contractor mortgages, however, is slightly higher than the rate of regular mortgages. This is due to the fact that contractor mortgages present a more risky money venture for the lenders. But just like regular mortgages, interest rates of contractor mortgages are significantly affected by the number of months one decides to pay his or her loan. In short, if one wants a lower interest rate, he or she should pay the loan over a lesser number of months, and vice versa.

In cases when one hasn’t been able to pay his or her mortgage loan on the specified date, lenders for regular mortgages usually bring the issue to legal authorities; and this situation can definitely stain one’s credit history—and that’s really a bad thing to happen to one who aspires securing another loan in the future. But with contractor mortgages, borrowers are contacted should they fail to pay on their designated schedule; they are usually presented with options and necessary assistance to catch up with their delayed payments. With contractor mortgages, borrowers can get the right support and assistance, not just financially. 

In a nutshell, contractor mortgages and regular mortgages have their own advantages to the borrowers. While regular mortgages are accessible only to the employed and stable individuals, contractor mortgages are available to the unemployed but earning individuals—the contractors and the freelancers. So even if one belongs to either of the two types of working individuals, he can still stash a mortgage loan right away. But knowing where to look for mortgage brokers or specialists is something one should strive to as this can significantly increase his chances of securing a larger mortgage loan with lesser interest rates.

Different Type of Mortgages Explained

In these present times where opportunities lurk in every corner, isn’t it comforting to know that there are people offering to lend a hand when our budget needs an extra nudge for us to be able to grab a passing opportunity by the rein? Mortgage loans have been the strong wall for individuals badly in need of money. And you also can benefit from these loans should the need arises. But before you go stumbling to apply for one, isn’t it better to take a moment and learn the different types of mortgage loan?

Mortgage loans, basically, are given loans protected by a borrower’s property. A mortgage note is used to prove the presence of the said loan and the property as collateral. And whatever reasons you have in applying for a mortgage loan, a property—termed as mortgage—is required to be encumbered to secure the loan. But aside from the granted mortgage, you must be able to prove that you are a good payer through a good credit history.

There two types of mortgage loan: the fixed rate and the adjustable rate mortgage. Fixed-rate mortgage is a loan with a fixed interest rate to be paid over a periodic payment schedule for the entire lifespan of the loan, while the adjustable rate mortgage is a loan that offers a fixed interest rate over a certain span of time—say a year—and gradually lowers down as the loan approaches its maturity. The latter presents a transfer of interest risk from the lender to the borrower.

The advantage of adjustable rate mortgage over the fixed rate loan is the ability of the borrower to evade later months’ interests by paying off the loan the soonest. But the factors you need to consider in applying a mortgage loan are the interest rates, maximum loan you can get and maximum time allowed of paying off the loan. So it’s necessary for you to study each mortgage loan being offered. You don’t want to end up in a loan with a sky-high interest rates, shorter payment maturity or lower loan offers.

Once you’ve already assessed all the above factors, make a list and slowly narrow them down. Verify their legitimacy and start choosing the best one. One more thing, don’t go applying for two or more lenders. It’s not advisable. One failed mortgage loan application takes one point from your credit record score. So get the best one. Focus on it. And you should just be fine.