Getting a Mortgage as a Contractor

• Can I get a mortgage as a contractor?
• Read our self-employed mortgage guide
• Try our self-employed mortgage calculator
• What type of contractors can get a mortgage?
  • What type of contractor mortgages are available?
  • Can I get a contractor mortgage as a first-time buyer?
• How to get a contractor mortgage
  • What documents do you need to apply for a contractor mortgage?
  • I have just started contracting – can I get a mortgage?
  • I am on a short-term contract – can I get a mortgage?
• Deposit requirements for contractor mortgages
  • How much can I borrow on a mortgage as a contractor?
  • How much contract history do I need?
• Can I remortgage as a contractor?
• Choosing the right mortgage lender as a contractor
  • Finding the best contractor mortgage rates
• Maximising your chances of mortgage success as a contractor
  • Common challenges contractors face when trying to get a mortgage
• Frequently asked questions

There are five main categories that your contract could fall under with lenders looking at different key points in each:

• Agency workers. In addition to your payslips, you’ll need to supply your contract and evidence that shows your employment history. While many lenders have a flexible approach to agency workers, not all of them are willing to lend to them.
• Self-employed. Typically, a 6-month minimum contract should be in place for a self-employed mortgage.
• Fixed-term contracts. You’ll usually need to prove previous experience as a contractor.
• Working under an ‘umbrella company’. A 12-month track record is normally required.
• Zero-hours contracts. Lenders will usually want to see a 12-month working history. But, depending on the lender and your circumstances, it might be possible for you to apply with less than a year’s records.

You’ll be pleased to know that it is completely possible to obtain a contractor mortgage as a first-time buyer.

As mainstream lenders have become more flexible in recent times, there hasn’t been a better time to obtain one. To add to this, there are a range of specialist lenders that can also be considered. These lenders have products tailored to first-time buyers who are contractors.

In general, the criteria, documentation required, and application process will be the same as a standard contractor mortgage. The only advantage an existing homeowner may have is that they may have built up equity in their home, which can contribute to their deposit.

If you’re a first-time buyer looking to obtain a contractor mortgage, speaking to a broker can help increase your chances of success. Why not reach out today and we can discuss your situation with a free consultation.

You will need to provide the following documents to support your application:

• A copy of your current contract. Lenders will need to see how much you are earning now and the length of time remaining in the current contract period. If your contract will be coming to an end in the near future, they might want to see a promise of renewal or extension, or evidence of new contracted work shortly coming into place.
• Bank statements for the last three months. This is to prove you have been earning regularly and at an affordable level for the mortgage you’re applying for.
• A copy of your CV. Your CV will prove your history of work in your role or specialisation as a contractor.
• Proof of I.D. All lenders need to know exactly who they are lending to. They will also make an in-depth check of your credit score and records.

As we often remind people looking for a mortgage, all lenders have different criteria. Some may ask for other information in addition to the above. However, most specialist lenders will find this sufficient to secure a mortgage.

This may seem like a challenging time to get a mortgage, but don’t worry, you should still be able to secure one.

Although, a lot will depend on your circumstances and the duration of the contract you now have in place. Lenders usually expect to see a minimum 6-month term.

The key is to establish the sustainability of income. Your chances of being accepted are also likely to be influenced by the type of work you are doing, as well as your history of employment in the same or a similar role.

You should not be prevented from obtaining a mortgage because you are on a short-term contract. Although, it can be a little more challenging proving that your contracts and income are consistent.

However, as long as you can show a steady history of earnings and employment, then it will count in your favour. Providing as much proof of previous, current and future contracts as possible will be very valuable and can reinforce to lenders that you still have a steady stream of income.

Your level of borrowing will depend entirely on the figure the lender uses for your annual income.

Lenders typically take your day rate, multiply it by the number of days you work per week, and then multiply that by 48. This gives them an indicative figure for annual income. They will then multiply this number by 3.5 to 5 times to get the figure you’ll be able to borrow.

For example, if your daily rate is £400 and you work 5 days a week, for 48 weeks a year, then an indicative annual income would be £96,000. Multiplying this by 3 to 3.5 means that you could be looking at a mortgage of £336k to £480k.

Many people assume that you will need to show at least three years’ worth of business accounts to get a mortgage. However, this is no longer true. You’ll be pleased to know that you can actually get a mortgage with as little as a copy of your current contract.

With a large section of the workforce in need of a mortgage, new, smaller, and more flexible lenders have entered the market. Fortunately, needing to supply three years’ worth of accounts is no longer always necessary.

A specialist contractor mortgage broker will not demand to see the same level of documentation as mainstream lenders. This means that they will be happy with different methods of showing a sustainable income. They understand the way your income is reported on paper may not be a true reflection of your affordability.

In most circumstances, the interest you pay is no different to that paid by someone in conventional employment.

The rate of interest you pay is largely down to your verified income and the size of your deposit.

Contractors can access all kinds of mortgages from different lenders. If you’re looking to get a mortgage as a contractor, get in touch.

From our experience the most common challenge contractors face when trying to get a mortgage is gaps between contracts. Many lenders prefer if gaps in between contracts are kept to a minimum, usually no longer than a month.

However, there are certain lenders that will be more accepting of longer periods of time, like 6 months for example. This is why working with a mortgage broker can be key, as they will know what lenders to approach based on your circumstances.

Another challenge many contractors face is the length of time lenders require you to have had contracts for. The majority of lenders will require, as a minimum, 6 months to a years’ worth of contracts. Although, this can sometimes be extended up to 2 years.

Furthermore, if you have long-term future contracts in place, and you can prove it, that will support your application very well as a lender can see that you have guaranteed work and income in place.