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How to get a Mortgage as a Contractor
Pete Mugleston

Pete Mugleston – Contractor Mortgage Expert

To find if you're eligible for and which mortgages are best for you please make an application, ask a question, use the live chat or give us a call on 0800 304 7880.

Mortgages specifically for the following types of contract worker (These can be in any industry):

  • Self-employed contractors with 6 months or more working history
  • Employed fixed/short term contractors with previous experience
  • Contractors/employees of umbrella companies
  • Zero hours contracts with 6 months working history
  • Agency workers with at least 12 months working history

Please note: If you are a medical or professional contractor – there may be specialist options available to you exclusively, please make an enquiry and let us know your profession, and an advisor will be in touch.

Mortgages for contractors in the UK can be something of a minefield. Part of this is because lenders have different views on what a contractor actually is. Typically, you are either an employed person working on a fixed / short term contract (often charity/government workers), or you are a self-employed person that works through one main company (often tradesman). Every lender will have their own policy on which of the two they will and won’t lend to, if at all, based usually on how long you’ve been contracting for, how long you’ve worked in that industry, if you’ve had contracts renewed, how long you have left on your contracts etc etc.

Whether you’ve been contracting in the UK for as little as six months or for many years, there’s lenders out there that will consider your application and the specialists working with us have access to all of them. To find out more or to discuss what contract mortgages are best for you, please make an enquiry, use the live chat, or give us a call on 0800 304 7880.

Mortgages for self-employed contractors & Sub-Contractors

Self-employed contractors are those who are registered as self-employed with HMRC and pay their own tax, National Insurance contributions, and either declare their income through self-assessment or have an accountant. Self-employed contractors may be sub-contracting for one or for several companies. To be eligible for this type of contractor mortgage, a history of at least 12 month’s work is usually required, and lenders will asses you based on the figures you declare as your net profit (sole traders & partnerships) or salary + dividend (ltd company directors).

Mortgages for recently self-employed contractors

If you have recently changed from an employed worker to a self-employed contractor in the same job role and industry, for the same or similar employer, then you may be eligible for a contractor mortgage despite not having 12 months history. The criteria on this varies between the lenders that consider it, but tends to be very strict and relies on day rate calculations and the specific details of your contracts when you start.

Mortgages for Fixed/short term contractors

Fixed and short term contractors often find themselves struggling to secure a standard mortgage on the high street, but are actually most likely of all the contractors to obtain finance. Applicants are usually required to have a minimum of 6 months contracting, with 6 months remaining on their current contract. The longer you’ve been contracting the better – often if you’ve had a contract renewed at least once more lenders are willing to consider it as a stable source of income and you have more chance of being approved.

How long is your contract history?

The great news for contractors on fixed and short term contracts is that there are a number of lenders available who only require six months’ contract history. If you only have 6 months history and have not had a contract renewed before (regardless of term), then certain specialist lenders may restrict the loan to value to around 80%. If you have had a contract renewed at least once and have a good 6 months left to run, you may be eligible at 90% LTV.

Anyone contracting over 12 months with at least 6 months left to run should be eligible, anyone with less than 6 months to run will be limited to just one or two specialist lenders, but it is still possible as the market stands today.

Mortgages for contractors of an umbrella company

Contractors working through an umbrella company are looked on very differently lender to lender. Some find it hard to define exactly who the employee works for, and have trouble establishing how sustainable the income is. As a result, many lenders flat decline anyone employed in this way. Thankfully, there are lenders content with lending to these types of contractor so long as they meet certain criteria. It makes a huge difference if you have been doing this form of work for longer than 12 months, or if you have had a contract renewed at least once. If neither of these are applicable it may be that you need to wait until you meet this criteria. If you’re unsure, please feel free to make an enquiry and an expert will assist you.

Mortgages for employees on zero hours contracts

Zero hours contracts are not uncommon nowadays, as employees are reluctant to commit to a fixed contract or a minimum number of hours every week, especially in industries where work can ebb and flow. As a result, there is less certainty that an employee on such a contract would consistently earn the income to make repayments month to month, so most lenders decline applications. Fortunately, this leaves a gap in the market for specialist lenders that are flexible and more understanding – a zero hours contract doesn’t mean the employee earns zero all year, and as such should be eligible to borrow something. With a track record of 12 months income, it is possible for certain lenders to consider an application, providing that the income is sustainable and work is likely to continue to come in. For professionals on zero hours contracts the length of working history required may be less.

Mortgages for agency workers

Contractors working via an agency often find themselves struggling to find a standard mortgage on the high street. However, since the Agency Workers Regulations (AWR) came into effect in 2011, designed to give temporary agency workers the same rights as those in permanent employment, there are lenders out there willing to consider agency workers for mortgages.

The brokers we work with deal regularly with lenders who approve mortgages for agency workers, and they can help you find the specialist who most suits your requirements.

Professional contractor mortgages

Professional contractors include but are not limited to people who work in IT, accountancy and the legal profession, for instance barristers and solicitors. Self-employed professionals can often find a lender willing to offer competitive rates based around their contract rate and are not bound by other factors such as the number of years of service in a fixed position. Professional contractors can sometimes apply for a contractor mortgage without the proof of an annual salary, provided that service history and daily rates are clear.

How much can I borrow as a contractor?

Finding out how much you can borrow as a contractor seeking a mortgage can be tough as every lender will use a different method and accept different types of income. If you’re on an employed contract it’s usually just your gross basic salary + any additional proven bonus or overtime. For self-employed contractors many of the specialist lenders will calculate your annual income by multiplying your contract day rate by the number of days worked each week x 48 weeks. Generally speaking you can multiply this total by 4 (a typical lending rate) to get a rough idea of your borrowing limit. A contractor on £300 a day could potentially raise £288,000.

Naturally the lender will take into consideration a number of other factors )credit score and regular outgoings on other financial commitments are a good example of this) and then run the figures through their own affordability calculator to give you an exact figure.

Other things to consider

Contractor mortgages and age – Some lenders may only provide contractor mortgages to those on fixed or short-term contracts if they are over 25

Contractor mortgages with adverse credit – Generally, the lenders that offer contractor mortgages are already exposed to a higher level of risk, and as a result most of them will not accept an application from someone with adverse credit. If you are a self-employed contractor with 12 months history however, you may well be eligible with adverse credit over 2 years old

Repayment structure – Typically, lenders insist on repayment only mortgages for contractors on fixed and short-term contracts.

Contractor mortgage enquiry

With access to all the lenders, the brokers we work with are able to search through them all to find the specialist most appropriate for the type of contractor mortgage you require. To find out more information and discuss what contract mortgages are best for you, please make an enquiry, use the live chat, or give us a call on 0800 304 7880.

Speak to an advisor

Speak to our team for friendly and competitive finance advice.

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Answer our quick survey and our team
will find you the best mortgage deals

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