Umbrella Company Mortgages

In this article, we’ll explain how to get a mortgage through an umbrella company, highlight which mortgage lenders will consider this application, and why speaking to a specialist broker would be a smart first step.

Can you get a mortgage in an umbrella company?

Yes, being in an umbrella company doesn’t make getting a mortgage impossible, but it will likely reduce your pool of potential mortgage lenders.

A significant number of lenders will not accept applications from contractors working through umbrella companies. Those who do will assess your situation on a case-by-case basis, which may involve complex affordability calculations and terms.

Eligibility criteria for umbrella contractors

The criteria will vary depending on each mortgage lender. The usual basic criteria around income, age, and credit history will apply, and every lender will have their own additional, specific requirements. Researching them all can take considerable time and expertise.

Some lenders may require you to have been a contractor for a minimum of time, for example, 6 months, 12 months, or even longer. Others will specify terms around the maximum time allowed between contracts or the amount of time remaining to run on your current contract. Some lenders will calculate affordability based on payslip averages, and others will look at day rates multiplied up to annual salary, but based on different assumptions about the weeks worked in any given year.

How to start your application

The first step to take is to enquire with us, and we’ll arrange for a specialist mortgage broker to contact you who can help with the following:

• Gathering together all the necessary documentary evidence and proof of income you’ll need – such as payslips from the last 3, 6, or 12 months, bank statements, and CIS vouchers
• Guidance on how to download and optimise your credit reports to identify any inaccuracies and outdated information that can be removed before you apply
• Identifying the best mortgage lenders with the most competitive rates for these types of applications

Benefits and drawbacks of using an umbrella company

The key pros and cons to be aware of when applying for a mortgage using an umbrella company are as follows:

Benefits

• Classed as an employee rather than self-employed reduces the need to produce any tax return evidence and documentation.
• Mainstream lenders such as HSBC, Halifax, and Barclays will consider this type of financing application.
• Potential to borrow more than if you were self-employed as borrowing calculations will be based on gross income rather than just profit.

Drawbacks

• The overall pool of lenders will be lower than if you were a typical salaried employee.
• Some lenders won’t consider your application if you work for multiple firms simultaneously.
• If you also have bad credit, this will further reduce the number of lenders you can approach.

Which lenders offer these mortgages?

Not all lenders will offer mortgages for contractors working under umbrella companies, which is why having a mortgage broker who understands this way of working is so valuable.

To give you an idea of which lenders might be open to applications and how criteria can vary between them, we’ve pulled a few possibilities:

• Halifax will consider umbrella company mortgages. The income they use is the lower of the gross value of the contract or income calculated from the payslip/bank statement. Both calculations are based on 46 working weeks per year.
• Barclays will use the average of the last 3 months taxable pay for affordability purposes, less holiday pay, and after any pre-tax deductions made by the umbrella company, such as the agency fee and employer NI. You must have been contracting for at least 12 months, and there can be no more than a 6-week gap between contracts in this period.
• The Bank of Ireland will assess income based on the gross pay from the umbrella company and not the original contract value.
  They will want to see:
  • The contract between the end client and the umbrella company
  • The contract between you and the umbrella company
  • 3 months’ payslips from the umbrella company and the corresponding umbrella invoice reconciliation statements

Work out your maximum borrowing.

Affordability for contractors using umbrella companies can be tricky, as lenders will apply different calculations when determining how much they think you can afford to borrow.

As a broad rule of thumb, most will limit borrowing to 4.5 times your annual salary equivalent. However, it is possible to get higher income multiples in some circumstances, such as 5 times your salary. Regular financial commitments like loans, credit cards, and car finance may also be considered.

Our mortgage calculator can give you a rough idea of what you can borrow, but remember, these figures are for illustration only. Your broker will be able to provide you with more bespoke calculations.

Speak to a broker who specialises in umbrella mortgages

Finding the right lender when you’re a contractor can be difficult, but knowing where to look for a broker specialising in umbrella mortgages can also be difficult. Most brokers will market themselves with a very broad appeal, but you need someone with that niche experience of understanding umbrella companies and how they work in relation to mortgages.

Fortunately our broker matching service can do this hard work for you, and at no extra cost to you.

Call us on 0330 818 7026 or make an online enquiry, and we’ll quickly assess your circumstances and arrange a no-obligation chat with a broker who we think has the best mix of skills and experience for you.