Contractor Mortgage Calculator
Want to know how much you can borrow for a mortgage as a contractor? Use our calculator below to find out.
Author: Pete Mugleston
CeMAP Mortgage Advisor, MD
Getting a mortgage as a contractor can be slightly complex, as the amount you can borrow may differ depending on whether you’re employed or self-employed.
Our contractor mortgage affordability calculator will help simplify things for you and clarify what size mortgage you could qualify for.
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 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.
How contractor mortgage affordability is calculated
Some mortgage lenders may use an average of your last three years’ earnings if you’re a self-employed contractor. However, these days, many lenders will look at your ‘day rate’ and the number of days per week this applies, multiplied by 48 weeks in the year (to take account of holidays, etc.).
Employed contractors can use your monthly pay-as-you-earn income (plus any bonus and commission) as an annual figure. Mortgage lenders will then apply their standard affordability criteria using a multiple of your income based on your annualised day rate calculation or employed earnings.
Most lenders use an income multiple of 4-4.5 times your annual earnings. Still, some may go as high as 5 times earnings or even 6 times if you’re regarded as a professional contractor such as a barrister or a locum doctor.
So, for example, if you’re a self-employed contractor earning £200 per day for five days a week, this translates to an annual figure of £48,000. Based on the typical income multiple of 4.5 times, most mortgage lenders will let you borrow up to a maximum of £216,000.
If you’re a relatively new contractor, don’t panic! If you contact us, we can introduce you to mortgage brokers who have experience arranging mortgages for people who have just started trading this way.
Speak to an expert about contractor mortgages
Maximise your chance of approval with specialist advice from a mortgage expert.
How our contractor mortgage calculator works
Our contractor mortgage affordability calculator is really simple and straightforward to use.
No personal details are required; all you need to input is:
- Whether you’re classed as employed or self-employed
- If employed – input your monthly income
- If self-employed – input your day rate and the number of days per week this rate applies
And that’s it! Now hit the ‘calculate’ button, and you’ll see three different income multiple examples illustrating the amounts you may be able to borrow for a mortgage.
Calculate your monthly repayments
Now, you can use these different amounts to work out what your monthly mortgage repayments could be by using our calculator here. Simply input the mortgage amount you’re looking to borrow along with an interest rate and loan term.
Mortgage Repayment Calculator
This calculator can tell you the monthly and overall cost of your mortgage, based on the loan amount, interest rate, and term length.
The monthly repayments on a mortgage would be:
- Loan amount:
- Monthly repayments:
- Total to repay:
- Total interest:
How interest-only mortgages work:
With an interest-only mortgage, you only pay the interest each month. The original loan amount (the principal) remains unchanged and must be repaid in full at the end of the mortgage term. This means lower monthly payments, but you'll need a repayment plan for the full loan amount.
To get exact numbers based on your specific income, outgoings, age and other info, you'll need to speak to one of our experts. Lending policies change regularly, so this is purely for illustrative purposes only, and is not tailored financial advice.
Speak to one of our brokers to save money on your monthly repayments
- Free initial consultation with no obligation
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- Honest, unbiased advice from whole-of-market brokers
- Expert guidance tailored to your situation
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Will the calculations be any different for limited companies?
Yes, if you’re contracting through a limited company, you can use any salary and dividends when evidencing your annual salary to calculate how much you can borrow.
If your income mainly consists of retained profits, it would be advisable to speak with a mortgage broker before applying to a lender, as very few would accept this for affordability purposes.
A broker can identify those lenders who will in advance, saving you time and potentially avoiding a situation where your application is declined.
What you should do next
Now that you’ve used our contractor mortgage calculator, you should have a clearer idea of how much you may be able to borrow and be ready to take the next steps towards getting the mortgage you need.
Rather than approaching lenders directly, the wise move now is to speak with a mortgage broker with experience arranging mortgages for contractors. They’ll be able to identify the right lenders who tend to offer mortgages in these circumstances on your behalf.
So, get in touch or give us a call at 0330 818 7026, and we’ll arrange for a specialist advisor to contact you immediately.
FAQs
For buy-to-let mortgages, personal income isn’t a key factor (although most lenders may not accept applications from someone with an annual income of less than £25,000).
The main factor would be the rental income the buy-to-let property can generate over and above the mortgage repayment. Most lenders expect the rent premium to exceed the mortgage repayment between 125% and 145%.
Ask a quick question
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Pete Mugleston
CeMAP Mortgage Advisor, MD
Pete, a CeMAP-qualified mortgage advisor and 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 successfully went the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained and 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!
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