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Contractor Tracker Mortgages – need to knows
What is a tracker mortgage?

A tracker mortgage is a mortgage which tracks a rate. Tracker rates typically follow the Base of England base rate, which is set by the bank, by 1-2%. Tracker mortgages come with various term lengths much like standard fixed rate mortgages.

A tracker mortgage can offer a lower rate than standard residential mortgages as well the opportunity to pay less interest due to lenders commonly being more flexible when it comes to tracker mortgages.

Standard tracker mortgages tend to last between two and five years and if you want to exit before this you will have to pay an exit fee. This is however standard with most mortgages.

Is a tracker mortgage the same as a discounted mortgage?

A tracker mortgage is not the same as a discounted mortgage although they are similar. A discounted rate mortgage is a set period of time under a discounted rate from the Standard Variable Rate Mortgage (SVR).

A tracker mortgage offers a discount from the SVR however it is not the same as a discounted rate as it is following a rate whereas discounted rates are set.

What is the best mortgage for a Contractor?

The best mortgage type for a contractor will depend solely upon the financial circumstances of the contractor. A tracker mortgage can offer a lower rate as the Bank of England base rate has been below 1% for over ten years.

A fixed rate gives the stability of knowing each month your monthly repayment will not change. Tracker rates are subject to change with the base rate however it is not very often that they do change.

You should explore all of your options and seek the help of a mortgage adviser if you are unsure of which option is right for you. You should make sure you know how much mortgage interest each type of mortgage will incur.

What are the advantages of tracker rates?

  • Introductory tracker interest rates are typically lower than other residential mortgages deals
  • If the rate falls, so will your monthly repayments
  • Some lenders will let you switch onto a fixed rate mortgage without any fees.
  • It can be easier to make overpayments on tracker rate mortgages – meaning less overall interest.

What are the disadvantages of tracker mortgages?

  • If the base rate interest rates rise – so will your monthly mortgage repayments
  • A collar rate can mean that you cannot take advantage of low rates if the base rate dips below a certain point
  • Some lenders will make you pay an early repayment charge if you need to get out of your deal early.

Are tracker rates available for Contractors investing in Buy to Let Mortgages?

There is no specific contractor mortgage out there, the same products are out there for everyone, the difference is in how you – as a contractor – are proving your income. You will have to provide more documentation alongside your mortgage application due to not being a PAYE employee.

Buy to let mortgages are available to everyone, including contractors. Buy to let mortgages are available as tracker, fixed and variable deals. As with all mortgages you will need to ensure you fit the criteria in order to access the product. You need to make sure you have a good credit rating and can provide documentation of your earnings.

If you are looking to invest in a buy to let, then you should ensure your finances are in order and you have planned and adequately budgeted for your mortgage. As a contractor there are more documents you will need to provide as well as your credit report.

You should seek the help of a mortgage adviser if you are unsure on your next step in terms of investment.

How can a Mortgage Broker help?

A Mortgage Broker can help by guiding you towards the most appropriate option for you through comparing mortgages. A broker will look into your personal circumstances and listen to your wants and needs from your next mortgage. Mortgage brokers are authorised, regulated and set by the Financial Conduct Authority (FCA) and are fully qualified to give you the financial advice you need.

Mortgage Brokers have access to the whole of the mortgage market and can access exclusive broker deals from lenders due to building a relationship with them over time. A broker will know what options will fit in with your financial situation and can even help you with your whole application too.

Brokers are all about helping people and will help you throughout the whole of your application. General enquiries will not incur a fee as we are here to make sure you feel more comfortable with mortgages and let you take that step on the property ladder.

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