Contractor Mortgages

This article will cover everything you need to know about getting a contractor mortgage, to secure the best rates speak to an expert mortgage broker.

Firstly, as a contractor are you mainly Employed, or Self-Employed?

Home Income Types Contractor Mortgages
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Updated: March 15, 2024

This article will provide all the information you need on how to get a mortgage if you’re a contractor, what evidence lenders will want to see depending on the type of work you’re doing and where to look for the right advice.

Can you get a mortgage as a contractor?

Yes, it’s possible. In fact, contractor mortgages are widely available these days with most lenders updating their eligibility criteria in response to the increasing number of people now opting for this type of employment. The type of contract you’re working under will be a key factor in determining how your application will be assessed.

There are a range of mortgage options for the following types of contractors…

  • Self-employed contractors
  • Fixed-term contractors
  • Short-term renewable contractors
  • Umbrella company contractors
  • Agency Workers
  • Zero hours contracts
  • Sub-contractors
  • Professional contractors

A lender’s definition of your contractor status will usually depend on how you pay income tax. If you pay tax via self-assessment you’ll be classed as self-employed. Or if, for example, you work for an umbrella company that pays your tax and provides you with payslips, then you’ll be classed as employed.

Some lenders will use your daily rate to calculate the amount you can borrow, while others will look at average annual earnings over a number of years. Time spent as a contractor and the consistency of your working patterns will also be taken into account.

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How to get a mortgage as a contractor

Your first step should be to speak to a broker who specialises in contractor mortgages. Make an enquiry with us and we will match you with an expert in this area for free.

Your handpicked contractor mortgage specialist will walk you through the following steps to full application:

  • Readying the correct documents and necessary paperwork specifically required for contractors, including proof of income and any SA302 statements
  • Downloading and optimising your credit reports in order to identify any inaccuracies and outdated information that could hinder your application
  • Finding the right mortgage lenders who look more favourably on applications from contractors and securing the best rate for you

How your contract type could affect your application

There are a number of ways you can be classed as a contractor, depending on how you charge for your services and the way you’re paid for the work you do. Each contract type is viewed differently by lenders when determining your eligibility for a mortgage.

  • Self-employed contractors.  A lender will want to see copies of – ideally – your last three years SA302 statements. From here they will either work out your average income across these three years or they may take the lowest annual figure if there’s evidence of large fluctuations.
  • Fixed-term contractors. Most mainstream lenders will want to see at least 6-12 months remaining on any fixed-term contract when you apply. If your income is taxed at source you’ll be classed as an employee.
  • Short-term renewable contracts. Short-term contracts such as three to six months are acceptable by some lenders if the total continuous period of work is at least twelve months. Evidence of any future contracts would also be beneficial.
  • Temporary contracts. Can be classed as either self-employed or employed depending on how income tax is paid. If you work for an umbrella company, you’ll need to provide your recent P60 tax overview, 3 months payslips, and bank statements.
  • Agency Workers. Your current contract should be no less than three months and have evidence of continuous employment for the last twelve. An employer’s reference from your current agency may be required by some lenders.
  • Zero hours contracts. Types of contracts acceptable include NHS Bank Nurses, retained firefighters, and supply teachers. Most lenders will want to see evidence of at least 12 months previous track record.
  • Professional contractors. Types of roles usually deemed acceptable would be I.T contractors, medical professionals, and accountants. Minimum of 12 months continuous contract with evidence of at least 6 months remaining is usually required by most lenders.
  • Limited Company. Some lenders will only take your salary and any dividends into account. So, if you’re only taking a low salary and retaining profits, you would be best served finding a lender who will include these when deciding how much you can borrow.

What if you’re a subcontractor?

Subcontractors are assessed by mortgage lenders in much the same way as contractors. If you trade this way, most mortgage providers will consider you eligible for finance if you have a 12-month track record of continuous employment and meet the rest of their criteria.

If you are a subcontractor enrolled in the government’s Construction Industry Scheme (CIS) you can use the gross income on your payslips rather than your business accounts or self-assessment for the mortgage provider’s affordability assessment.

You can read more about the scheme in our guide to CIS mortgages.

Can you get a mortgage as a contractor inside IR35?

Yes, but your choice of lenders is likely to be fewer as some mortgage providers have not yet firmed up their criteria for contractors inside IR35. Since the legislation was introduced, some umbrella contractors and professionals on fixed-term agreements have found that they are now unable to meet the affordability criteria at many lenders.

This has hit new or first-time contractors harder than established professionals, but those who trade as a limited company have not seen their affordability change dramatically.

Do professional contractors get better deals?

There are mortgage lenders who favour professional contractors, and to attract their business, they may offer higher income multiples and potentially lower rates too. The brokers we work with have found exclusive deals for the following types of professional contractors…

What happens if your contract is coming to an end?

Most lenders will expect your contract to still have between 6-12 months remaining on it when you submit a mortgage application. This will, naturally, give them confidence that sufficient time is remaining on your current terms before having to seek and agree on future work opportunities.

If your contract is expiring sooner – say, within 3-4 months – speak with your mortgage broker about how to present additional information to a lender, such as details about:

  • Your track record as a contractor up to this point
  • Experience in your line of work
  • History of regular contract renewals
  • Any new contracts already agreed
  • References from regular clients/employers

How much could you borrow

This will depend on the type of contractor you are, how much income you have, and the calculations your lender uses. Some base mortgage offers on the borrower’s average income over 2-3 years, while others will use the lowest income figure from that period. Use our calculator below to work out your maximum borrowing.

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

You could borrow up to 

Most lenders would consider letting you 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.

Some lenders would consider letting you 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.

A minority of lenders would consider letting you 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.

For contractors with pay-as-you-earn income, most lenders take their basic salary plus any bonuses and commission from that timeframe and apply an income multiple to work out the maximum loan amount. Most lenders will use 4.5 times your salary, but some go higher.

Keep in mind that some mortgage providers will cap the amount of bonus and commission earnings that you can declare, while others will accept 100% of it.

The maximum borrowing for self-employed contractors is typically based on the applicant’s day rate. The lender will take this figure, multiply it by the number of days worked each week, and then times this figure by 48. To work out the maximum mortgage that you qualify for, they will then multiply the total by 4.5, or whatever income multiple they use.

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Which lenders will consider your application?

Your choice of approachable mortgage lenders will be determined by the type of contract work you do. Some mortgage providers prefer certain types of contractors over others. For example, Metro Bank won’t include any agency work in their affordability calculations, while Bath Building Society and Accord won’t lend to people on short-term renewable contracts.

Here are a few examples of the restrictions you might encounter from specific lenders…

  • TSB will only lend to fixed-term contractors who have at least two years’ history working in the same field or have been contracting for the same employer for a minimum of 12 months, with at least six months left to run on that agreement.
  • Natwest will only lend to sub-contractors if they have been working in that capacity for at least 12 months and will ask to see evidence that further work has been offered if the applicant’s income is £75,000 per year or lower.
  • Halifax insist that zero-hour contract workers must have at least 12 months’ history with the same employer or others in the same field to be considered for a mortgage.

The above demonstrates a few examples of what mortgage lenders will and won’t offer to contractors. This corner of the market is vast and can be difficult to research alone so seeking advice from a broker who specialises in contractor mortgages is recommended.

What interest rate to expect

Take a look at our rates table below to get an idea of the mortgage deals available for self-employed contractors. Please note that these rates are subject to change.

Lender Product Details
Frosted Rates Image

Looking for more rates and deals?

We can match you with a mortgage broker who can provide you with up-to-date bespoke rates and deals from across the entire market.

Last updated May 2024

The above rates are purely for example purposes and are subject to change at the provider’s discretion. Speaking to a mortgage broker is the best way to find the most up-to-date deals.

Mortgage interest rates can be slightly higher for contract workers compared to PAYE employees, but this isn’t always the case. Introductory rates for contractors can range between 1.64% up to around 2%, if there are no risk factors present.

They can occasionally be higher because some types of contract work are considered higher risk than full-time employment, so lenders might up their rates to safeguard themselves.

That said, it’s entirely possible to secure a mortgage as a contractor with a low interest rate, and there are ways that you can lower any risk associated with your trading style, such as…

  • Putting down extra deposit
  • Paying off any debts you’re able to settle
  • Waiting until you have at least two years’ trading under your belt
  • Applying for your mortgage through a specialist broker

What about if you’re new to contracting?

If you’ve only recently become a contractor then it’s still possible to get a mortgage – particularly if you already have a strong prior track record in a particular field spanning a number of years. It’s important to follow the steps outlined in the sections above:

  • Reach out to a mortgage broker with experience helping contractors secure mortgage lending
  • Save as much as you can for a deposit
  • Check and optimise all of your credit records
  • Gather supporting evidence of previous employment to support your track record and any new contracts of employment you have secured since your employment status changed

Remortgaging

If you were a contractor when you originally took out your mortgage and your employment capacity is unchanged, your remortgage application will be more straightforward than if your circumstances have changed. Your mortgage lender is still likely to reassess your income and employment situation due to the often-unpredictable nature of contract work.

However, there are various circumstances that make it more difficult for self-employed people to remortgage or can cause your rate to increase.

These include if:

  • Your most recent year’s income is lower than the income you declared for your original mortgage
  • You have made a loss in one of the years since you took out your mortgage
  • You were previously in full-time employment but are now newly self-employed

For homeowners who have turned to contracting since they took out their mortgage, things can be a little more complicated as well. The range of rates and deals that you qualify for might be totally different to the products on offer when you were a PAYE employee.

It’s possible that you no longer fit the criteria at your current lender, and applying with them would lead only to disappointment. With this in mind, searching the entire market before settling on a lender is recommended, especially if you only started contracting recently, as some are better equipped than others to offer remortgages for contractors.

Key takeaways from this guide

  • 01

    You can get a mortgage as a contractor:

    Even if you’re on a zero-hour or fixed-term contract, it’s still doable with the right advice. While your mortgage prospects will come down to the type of contractor you are, how long you’ve been doing it for and how much income you make, there are options for people who trade this way.
  • 02

    Using a contractor mortgage broker is highly recommended:

    Mortgages for contractors can be complex, especially if you have non-standard income, but a broker who specialises in arranging them can really level the playing field for you. The right advisor will have the knowledge, experience and lender contacts to get you the best mortgage deal based on your needs, personal circumstances and contract type.
  • 03

    We can match you with your ideal broker:

    You’ll need a broker who specialises in mortgages for contractors and our free advisor-matching service will handpick someone who is the perfect fit. Not only will they be an expert in this field, but they will also have a strong track record helping customers exactly like you.
  • 04

    They’ll find the perfect lender for you:

    Once you’ve been matched with your broker, they will search the entire market for the best deal that you qualify for. They will guide you through your application, helping you with any paperwork along the way, and their expertise will boost your chances of securing the mortgage you need.

FAQs

Yes, and the potential complexity of your income might even be less of an issue here. This is because buy-to-let mortgages are usually assessed based on the property’s projected rental income, rather than your personal earnings. Some mortgage lenders also offer exclusive rates and deals for self-employed landlords who trade as a limited company.

See our buy-to-let mortgage guide and our guide to limited company mortgages for more.

Yes, but this can be more difficult as some lenders will feel that there’s more uncertainty around your employment situation. It will certainly help your cause if you can prove that you have contract work to return to after your maternity leave has ended, or if you have a strong track record of contract renewals within the same industry.

If the lender is convinced that you have the means to make your mortgage payments after your maternity leave, then there could be borrowing options for you.

See our guide to mortgages on maternity leave for more.

Your mortgage options are likely to be limited if you have no deposit to put down, since self-cert mortgages for contractors have now disappeared from the UK market.

There are, however, a few mortgage options for people with no deposit to put down, but most of them require support from a family member, such as a guarantor mortgage.

See our guide to no deposit mortgages for more information.

Yes, but if you’re a first-time buyer, this could add another layer of difficulty but it’s certainly not impossible. There are steps you can take to improve your chances of success, such as saving as much deposit as you can, checking you have a clean credit record and gathering as much evidence of your earnings as a contractor to date.

If you’re looking at a joint mortgage, say with your partner, their income and employment status will also be taken into account, which could bolster your application, particularly if they’ve been in full-time employment for a number of years.

You could also consider a guarantor mortgage if you have a family member willing to provide the necessary guarantee and security for your repayments.

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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 Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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