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Contractor Mortgages

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: April 22, 2022

We get loads of enquiries about mortgages for contractors from those looking to get the right advice, and that’s hardly surprising since the definition of a ‘contractor’ can vary from one lender to the next.

For this reason, you may have found getting a mortgage as a contractor tricky, but the good news is that for many, there are numerous options available. Read on to find out what they are or make an enquiry to speak to an expert today.

What is a contractor mortgage?

A contractor mortgage is designed for workers without a permanent position. Many lenders turn down contractors because they prefer applicants in full-time employment, who they see as lower risk.

Contractors can be self-employed individuals, fixed-term contractors, umbrella company employees, zero-hour workers and agency professionals. Some mortgage lenders could even offer exclusive deals for medical or professional contractors.

Who can get a UK contractor mortgage?

Contract workers based in the UK would be the obvious answer, but the definition of a contractor can vary from one lender to another.

You are a contractor if either of the following applies…

  • You’re either an employed person working on a fixed or short term contract (often charity workers or government employees)
  • You’re a self-employed person that works through one main company (often tradesman)

Some lenders will lend to one of the above but not the other, while others won’t cater for either. This is why it’s important to seek specialist advice from a broker with access to the entire market.

What do mortgage lenders look for in contractors?

Customers often ask us “can I get a mortgage as a contractor?” and the answer is likely to vary from lender to lender, based on a wide range of variables.

Along with the usual criteria – such as your age, credit rating, income and the property type (which we will cover in more detail later) – Contractor friendly mortgage lenders take the following factors into account when deciding whether you’re eligible for a mortgage…

  • The type of contractor you are
  • How long you’ve been contracting for
  • How long you’ve worked in that industry
  • If you have had contracts renewed before
  • How long you have left on your contract

Read on to find out how the above variables can impact on your mortgage eligibility.

What type of mortgages are there for contractors?

There are mortgages for the following types of contractors in the UK (usually in any industry)…

  • Self-employed contractors:
    On day one of a contract, as long as it’s at least six months long
  • Employed fixed/short term contractors:
    Previous contractor experience is usually required.
  • Umbrella company employees:
    12 months working history usually needed.
  • Zero hour contract workers:
    With at least six month’s working history.
  • Agency workers:
    12 months working history is typically needed.

Self-employed contractor and sub-contractor mortgages

Anyone who is registered as self-employed with HM Revenue and Customs (HMRC) and pays their own tax and National Insurance contributions is classed as self-employed, whether they declare their income through self-assessment or have an accountant do it on their behalf. Self-employed contractors might be sub-contracting for one or a handful of companies.

Getting a mortgage as a self-employed contractor or sub-contractor in the UK might prove difficult if you have less than 12 months’ worth of working history, as most lenders need you to have been trading in this capacity for a year – some, however, may accept six months, and others might even consider you on day one of a new contract (offering a mortgage based on a multiple of your day rate), as long as it is for at least six months and you have history of working in this capacity.

Lenders who offer these mortgages usually assess the borrower based on the figures they declare as net profit (for sole trader mortgages and partnerships) or your salary plus dividends (if it’s a mortgage for a limited company director).

Mortgages for recently self-employed contractors

We often hear the question “can contractors get a mortgage if they’ve just started trading this way?” and as we’ve already discussed, some providers may lend to you if you’ve been self-employed for less than a year. These deals usually call for specialist contractor-friendly mortgage providers and are often based on day rate calculations and specific details of your contract when you started.

Mortgages for fixed/short term contractors

Generally speaking, those on fixed or short term deals might find it easier to get a mortgage as a contractor than others who trade this way. Applicants are required to have been trading for at least six months and have a further six months to run on their current contract.

The longer you have been trading for, the better in the eyes of the lender, and it will also help your cause if your contract has been renewed at least once. That way, the mortgage provider is more likely to view your earnings as a stable source of income.

What if my contract has never been renewed?

Getting a mortgage as a short or fixed-term contractor whose deal has never been renewed is still possible, but the number of approachable lenders might be smaller, especially if you only have six months’ working history on record.

Certain lenders might cap the loan to value ratio (LTV) to 80% under these circumstances, but it can be as high as 90% if your contract has been renewed at least once and you have a good six months or so remaining on your existing agreement.

Umbrella contractor mortgages

Whole-of-market advice from contractor mortgage specialists might need to be sought if you’re a contractor working through an umbrella company, as some lenders may struggle to grasp how sustainable your income is and turn you away outright. However, there are lenders who cater to this type of borrower and may be able to accept an umbrella company mortgage, subject to certain criteria being met.

It will usually help if you’ve been trading in this capacity for at least 12 months and your contract with the umbrella company has been renewed at least once. If neither of those conditions apply, it’s still worth making an enquiry with us so the advisors we work with can outline all of your options.

Mortgages for zero-hour contract employees

A specialist contractor mortgage broker may also be required if you’re on a zero-hour contract, as many mainstream lenders consider these borrowers too high risk.

The providers which do cater to them will typically ask for a track record of 12 months’ income as well as evidence that the work is likely to continue. It may, however, be possible to find a lender willing to offer a zero-hour contract mortgage with less than a year’s worth of income, with whole-of-market access.

Contractor mortgages for agency workers

We sometimes heard the question “can I get a contractor mortgage if I’m an agency worker?” and the answer is yes, subject to standard criteria. Agency workers are merely a type of contractor, so much of the above applies.

Since the Agency Workers Regulations (AWR) was introduced back in 2011, temporary agency workers have enjoyed some of the same rights as those in permanent employment, making them lower risk to mortgage lenders.

With this in mind, some providers are happy to lend to agency workers (as long as they have at least 12 months experience working in the capacity) and the advisors we work with know who they are.

Professional contractor mortgages

Examples of professional contractor mortgages include…

  • IT contractor mortgages
  • Mortgages for contract workers in accountancy
  • Mortgages for contract worker solicitors

Professional contract workers can sometimes find mortgage providers willing to offer them a home loan based on contract rate, unaffected by factors such as the amount of time served in the role. If your day rates and service history is clear, though, it may even be possible to secure a mortgage without proof of an annual salary.

IT contractor mortgages

Generally speaking, IT contractor mortgages are treated the same as other professional contractor mortgages.

IT contractor mortgage rates will be no different to any other type of contract worker, in the sense that they will be dependent on the type of contract you are on, how long you’ve been employed this way and how long is left to run your deal, among other factors.

Why IT contractors need specialist mortgage advice

Simply put, because not all lenders understand the specific needs of somebody employed in this capacity.

There are mortgage lenders and brokers who specialise in IT contractors, and the advisors we work with can introduce them to you, and they can provide you with the kind of in-depth information you’re unlikely to find on IT contractor mortgage forums or lenders’ websites.

For specialist advice on mortgages for an IT contractor or any other type of professional contractor mortgage, make an enquiry and the advisors we work with will connect you with the right lender based on your needs, background and circumstances.

Why you should speak to a specialist contractor mortgage broker

Contractors in the market for a mortgage should always start by seeking bespoke advice from a specialist contractor mortgage broker because mainstream lenders may not understand the complexities and challenges faced by borrowers who make their money this way, and may therefore offer you less favourable rates or turn you away altogether.

For example, Halifax contractor mortgages for those employed on zero hour contracts require the borrower to have been working this way for at least 12 months (with the same employer or different employers in the same field) but specialist lenders can cater for borrowers with 6 months’ history.

With specialist advice from a whole-of-market advisor, like the ones we work with, you will have access to all of the best mortgage lenders for contractors in the UK, and can rest assured that you will be introduced to the right one for a borrower with your needs and circumstances.

Can I get a contractor mortgage with no broker fee?

Whilst its true that some brokers don’t charge fees, fee free contractor mortgage brokers tend to focus on simpler cases. We are often approached by those who have been turned away, and the experts we work with are able to help.

The contractor mortgage advisors we work with only charge on success, so they will refund any upfront broker fees if they fail to secure an agreement in principle for your contractor mortgage  – and will even do so if the deal breaks down at a more advanced stage than this.

Get in touch to speak with a mortgage broker with experience in your type of contracting work.

How much can I borrow on a contractor mortgage?

You can use our contractor mortgage calculator to get a rough idea of this…

Contractor Mortgage Affordability Calculator

Our contractor mortgage calculator will tell you how much you can borrow, whether you work in an employed or self-employed capacity. Select your trading style below, enter the relevant details about your income and our calculator will do the rest.

You’re self-employed if you run your business for yourself and take responsibility for its success or failure
The amount of money you earn each month. If it varies, put the average.
The amount of money you earn each month. If it varies, put the average.
If you don't work the same days a week, put the average.

You could borrow up to 

You should be able to to borrow...

This is based on a multiple of 3-4.5 times your income, a standard calculation used by the majority of UK mortgage lenders. You should speak to a mortgage broker for bespoke calculations if you have been contracting for less than 12 months, your contract is coming to an end, or there is uncertainty around your long-term employment.

This is based on a multiple of 3-4.5 times your income, a standard calculation used by the majority of UK mortgage lenders. You should speak to a broker for bespoke calculations if you’ve been self-employed for less than 2-3 years, have declining profits or fluctuating income.

You might be able to to borrow...

This is based on 5 times your income, a calculation only some lenders are willing to offer. You may struggle to find a lender who will offer this income multiple to an employed contractor without the help of a broker, and you should seek advice from one regardless if there is any uncertainty around your employment situation.

This is based on 5 times your income, a calculation only some lenders offer. You might need a broker to access this salary multiple and should take advice from one regardless if you’ve been self-employed for less than 2-3 years, have declining profits or fluctuating income.

With expert help you could even borrow...

Only a small number of options are available for employed contractors who want to borrow based on this salary multiple. Few UK mortgage lenders offer mortgages based on x6 income under any circumstances, and you’ll almost certainly need the help of a specialist mortgage broker who knows this corner of the market inside out to access them.

Only a small number of options are available for self-employed contractors who want to borrow based on this salary multiple, as few mortgage providers are willing to offer 6 times salary deals. You’ll almost certainly need the help of a mortgage broker to borrow this amount.

Get Started with an expert broker to find out exactly how much you could borrow.

Get Started

The exact amount you can borrow depends on…

  • The type of income you have
  • How much deposit you have
  • How the mortgage provider works out your affordability

If you’re a contractor seeking a mortgage on pay-as-you-earn income, the lender will usually take into account your gross basic salary along with any regular bonuses and overtime you evidence (although some providers place a cap on the percentage of this supplementary income they will accept).

If you’re self-employed, finding a specialist lender who will offer you a contractor mortgage based on your daily rate could be the most viable option.

They will calculate your income by taking your day rate and multiplying it by the amount of days you work each week x48. If you multiply this figure by four (a typical lending multiple), you will get a rough idea of how much you could borrow.

However, you should note that some mortgage lenders for contractors are more generous than others are more generous than other and may go up to five or even six times that figure.

For example, a contractor on £300 per day could potentially raise £288,000 from a lender who offers x4 income multiples, but from a lender who goes up to x5, they could get a £360,000 mortgage. Moreover, lenders who stretch to x6 might offer the same borrower £432,000.

How much deposit do I need for a contractor mortgage?

For lower-risk borrowers, it should be possible to get a contractor mortgage on a residential property with a 10% deposit. This means that the loan would be offered with a 90% loan to value ratio, and to get the lender to agree to that, it will help if your contract has been renewed at least once and has a minimum of six months left to run on it.

Most lenders will accept a 10% deposit for a contactor mortgage, but some might expect 15-20% if there’s risk involved in the deal (e.g. bad credit, non-standard construction). A few, however, might consider offering mortgage with a loan to value (LTV) ratio of 95%, under the right circumstances.

It may be possible to get a contractor mortgage from certain specialist lenders with a 5% deposit, thanks to government schemes such as Help to Buy.

Help to Buy contractor mortgages

The government’s Help to Buy scheme provides a low interest loan to beef up the size of a borrower’s deposit to help them get a foot on the property ladder. Some contractors will be eligible for the scheme, and like everyone else, they will need to contribute 5% of the deposit themselves and the property they’re in the market for must be a new build worth up to £600,000. It must also be their main residence and the mortgage type is limited to capital repayment.

The equity loan will cover 20% of the cost of your home, so you will need a 5% deposit and a 75% mortgage. You won’t be charged fees on the loan for the first five years of your home ownership.

Although it’s very much possible to apply for the Help to Buy scheme if you’re a contractor, the way some lenders assess your affordability and declarable income could complicate the deal and put you at risk of ending up on unfavourable rates or being turned away altogether.

It’s therefore essential to seek specialist advice from a broker with access to the entire market if you’re after a Help to Buy contractor mortgage. The advisors we work with can connect you to the lender best positioned to offer you a good deal under these circumstances.

Can I get a Shared Ownership contractor mortgage?

Through the Shared Ownership scheme, you can get onto the property ladder by purchasing a percentage of your home and renting the remaining share from a developer or housing association.

The initiative is typically aimed at those in the market for affordable residential property and you can purchase anywhere between 25% and 75% of the property’s value via a mortgage.

While it’s possible to qualify for a Shared Ownership mortgage if you’re a contractor, the complexity of the deal means that seeking advice from a broker with access to the entire market is vital.

Make an enquiry and the experts we work with will connect you with the best lender for Shared Ownership mortgages that are geared towards contractors.

Are there offset mortgages for contractors?

With an offset mortgage, you can balance your savings against your outstanding mortgage balance. To qualify for this product the borrower’s mortgage and linked savings account must be with the same lender.

The balance in your savings account is ‘offset’ against the mortgage balance and you would only pay interest on the difference between the two figures.

Offset mortgages are popular among contractors with substantial savings as they are often flexible and can help borrowers avoid savings interest. Offsetting a mortgage against a savings pot allows you to overpay one month and pay less the next, should that be your preference, and that can be useful for anyone whose income is likely to fluctuate from one month to the next.

Not all lenders provide offset mortgages, so you will belong to two niche categories if you’re a contractor seeking one. With this in mind, it’s essential to seek whole-of-market advice to make sure you find the lender best positioned to arrange offset mortgages for contractors in the UK.

Are there buy to let mortgages for contractors?

Yes! And the complexity of your income won’t be an issue with some buy to let lenders. Many mortgage providers in this sector will be more interested in the viability of the investment, i.e. whether the BTL property’s forecast rental income will cover the mortgage payments. As long as the expected rent covers the mortgage payments by 125-145%, most BTL lenders should be happy.

As long as the lender is confident you can cover the mortgage this way, factors such as how long you have been in your contract and how long is left to run on it will be of lesser importance to some BTL providers, although others may insist that you have a minimum amount to run on your contract.

Furthermore, certain BTL mortgage lenders have minimum income requirements (around £25,000 is standard) and are more likely to demand this if you’re a first-time landlord.

Getting the best mortgage rates for contractors

There’s no single ‘best rate’ for a contractor mortgage. The key to getting the most favourable interest rates for a contractor mortgage is by researching different mortgage lenders’ eligibility requirements and seeing if you could improve your profile before you start applying. A whole-of-market broker can also help with this and find deals you may not have access to.

Mortgage requirements for contractors

As we mentioned earlier in this article, contractor mortgage lenders will be interested in how long you have been trading for and how long is remaining on your current contract when determining your eligibility and calculating how much you can borrow. Factors such as whether your contract has ever been renewed and the type of contractor you are may also be considered.

You can find more information about how these variables come into play in the ‘Who can get a contractor mortgage section?’ section at the top of this article, but there are other factors the lender might consider when determining which rates to offer and whether to offer you a deal at all.

Contractor mortgage age limits

Some contractor mortgage providers will only lend to borrowers on fixed or short-term contracts if they are aged over 25, and there are mortgage lenders in general who impose upper age restrictions. At some, it’s 75, others 85, and a minority will impose no maximum age restrictions, as long as they are confident you will be able to pay off the contractor mortgage into retirement.

If you fall outside of these age parameters, it’s important to seek advice from a specialist contractor mortgage broker to ensure you end up with the best rates.

Contractor mortgages with bad credit

As lenders in this sector are already taking on a level of risk, getting a  mortgage with bad credit can be difficult, but if you’re a self-employed contractor with 12 months’ working history, finding a favourable deal may be possible if the adverse credit is more than two years old.

The mortgage type

Generally speaking, most mortgage lenders would only be willing to offer repayment mortgages to fixed and short-term contractors, so getting an interest only contractor mortgage can be tricky.

However, with the help of specialist contractor mortgage brokers, you will have access to the minority of providers who may consider lending under these specific conditions.

How to get a contractor mortgage

  1. Establish your situation by working out what type mortgage you want and gathering information such as your credit reports (we can do this for you, if you’d prefer) and your latest financials.
  2. Speak to a whole-of-market broker – make an enquiry here
  3. Your broker will carry out a fact find to establish which mortgages you qualify for, will answer any questions you have and help you optimise your credit file
  4. Your broker will introduce you to  the lender offering the best contractor mortgage for a borrower with your specific needs and circumstances
  5. The broker will seek an agreement in principle – a non-binding agreement from the lender that they’re willing to offer you a mortgage
  6. A full mortgage application is made: you will submit your ID documents and proof of income, but the broker will do most of the legwork
  7. The valuation takes place: most lenders will appoint a local surveyor to book this in directly with you
  8. A formal mortgage offer is made: once the application has been approved and underwritten, the lender will make you a firm contractor mortgage offer
  9. Legals: next, it’s over to the solicitors so they can carry out their legal due diligence. This is the final step before completion.

Contractor mortgage fees

Before they kick off their application, many customers ask us what fees they will be liable for when taking out a contractor mortgage, and the answers is the same as everyone else.

Below you will find an overview of the costs and fees which typically come with mortgages. You should note that not all lenders will bill you for all of the below, depending on the deal they give you.

  • Arrangement fees
  • Booking fees
  • Valuation fees
  • Survey fees
  • Broker fees
  • Stamp Duty
  • Conveyancing fees
  • Land Registry fees

How much you will be billed for the above, and whether you will have to foot these costs at all, will vary from lender to lender. Make an enquiry and the advisors we work with will help you determine the overall cost of you contractor mortgage and connect you with the right lender.

We can find the best contractor mortgage broker for your needs and circumstances

If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry here.

Then sit back and let us do all the hard work in finding the contractor mortgages broker with the right expertise for your circumstances.

They will compare deals across the whole of the market and make sure you’re paired up with the right lender for your needs and circumstances, which could potentially save you time and money in the long run.

We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Contractor mortgage FAQ

Can I get a self-build contractor mortgage?

A self-build mortgage is a product you can apply for if you have the means and expertise to build your own home. Most lenders who offer these will loan up to 75% of the plot’s value and 60% of the build cost. Once built, the average self-build has a mortgage of up to 70% of the property’s value.

Not all mortgage lenders offer self-build mortgages and they can be difficult to come by. That said, it’s possible to get one as a contractor proving you have a substantial deposit and the right expertise.

Can I get a 100% contractor mortgage?

Technically speaking, 100% mortgages no longer exist for any type of borrower, but a guarantor mortgage may be an option for contractors who have no deposit to put down.

With a guarantor mortgage, the family member or friend who is acting at your guarantor must put up a property they own or place a lump sum into a savings account with the lender to secure the mortgage against. If you are unable to keep up with your mortgage payments, your guarantor could lose their home or savings to settle the debt.

If your guarantor chooses the savings option, they will be unable to withdraw money from this pot until a certain amount of the mortgage has been paid off, but the savings will accrue interest.

Can I get a contractor mortgage anywhere in the UK?

You will find lenders who are willing to offer these products across the UK, although some might place postcode restrictions in Scotland, Wales and Northern Ireland.

Specialist international lenders and UK-based lenders who operate in other territories may be willing to offer overseas mortgages to contractors, but given that they are harder to come by, it’s important to seek specialist mortgage advice from a whole-of-market expert first.

Are there contractor mortgages for Limited Company borrowers?

Yes, but finding a specialist lender is important if you trade this way. There are specific mortgage providers who will allow Limited Company customers to borrow based on dividends or profits, rather than the annual salary they pay themselves, which may be significantly lower.

Get in touch and the whole-of-market advisors we work with will help you find the best mortgage for contractors who trade as a Limited Company.

Can a contractor get a mortgage while on maternity leave?

It may be possible but with some caveats. Mortgage lenders and underwriters carry out stringent checks on borrowers who are applying for a mortgage on maternity leave as this can impact earnings and therefore the customer’s ability to keep up with their mortgage payments.

Some lenders may be flexible enough to cater for contractors who are either on maternity leave or going on maternity leave, but their lending decision may ultimately hinge on factors such as whether the borrower can prove they will have work to go back to after their maternity and whether they will have income during it.

Obviously, it helps if you’re on a contract which includes maternity pay or if you can prove that you will have work to return to in the future.

How do I find the best mortgage deals for contractors?

Specialist advice from a whole-of-market advisor is where you should start. The ones we work with have access to all of the best contract mortgage providers and can connect you with the right one for a borrower with your need and circumstances if you make an enquiry.

Ask a quick question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Contractor Mortgages

Ask us a question and we'll get the best expert to help.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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