Contractor Mortgages
Mortgages based on hourly/daily rate, we are experts with over 10+ years experience working with contractors.
Mortgages based on hourly/daily rate, we are experts with over 10+ years experience working with contractors.
Contact UsOften referred to as a ‘Contractor Mortgage’ however there is no difference with the type of mortgage you get. It’s a normal mortgage, with a normal lender, with a normal interest rate. The difference is speaking to the right specialist contractor mortgage broker who understands you and the way you work.
Applying for a mortgage as a contractor, regardless of whether you’re a Limited Company, Umbrella Employee or Fixed term can seem difficult. To keep it simple, as long as you meet our criteria deeming you a ‘Contractor’ then we will be able to use a copy of your contract as your proof of income and will ignore your Limited Company accounts or payslips as proof of income.
There are different ways contractors operate, below are the common payment mechanisms
Contracting through your own Limited Company has always made it tricky when applying for a mortgage. When you are dealing with lenders directly or a non-specialist mortgage broker, you will generally be classed as self employed, which to a degree is true. You must not get the two confused. As a self employed applicant you will often be required to send two years accounts or tax calculations to prove your income (see self employed).
As a contractor it can be far easier and fairer to prove your income. We will unlock your true borrowing potential by using your daily or hourly rate and evidence this using a copy of your contract(s).
Once we’ve established you meet the criteria for this, you may be able to borrow upto 5x the annualised contract value. This way of proving income is far more generous than looking at your salary and dividend drawings for the past 2 years!
We ensure you’re not ‘penalised’ for being a contractor when it comes to the rate you’re charged. You will not pay a higher interest rate because of your income. However, there are certain lenders in the market who cannot take a view of your day/hourly rate so therefore there aren’t as many options in comparison to being permanently employed.
Over the years the amount of contractor friendly lenders that can consider your contract rate has increased significantly and they are far more accessible now in comparison to 5-10 years ago.
We have relationships across the market with lenders who understand how to prove your income and will ensure they offer the mortgage in the correct way.
If you are currently working through an umbrella company, you need to ensure you are applying for your mortgage in the right way. You will not be classed as a permanently employed applicant. The main difference seen when working through an umbrella company is that the majority of your pay may be classed as additional income such as commission, overtime or bonus which will cause confusion with the lender.
Most mortgage lenders will only take a percentage of bonus, overtime or commission and therefore it’s likely they’ll reduce the amount you can borrow, if not applied for correctly.
The good news is that we have relationships across the market with many genuine contractor mortgage lenders who will consider your income still based on the gross contract value and not your net pay after tax and NI. You’ll still get access to competitive rates and high street lenders.
We will review your payslips prior to making an application to ensure there won’t be any issues later in the process. We’ve recently seen a shift in the documents that specialist lenders are asking for, most are now asking for payslips. They will want to see what deductions are taken from your gross pay, such as the umbrella companies margin but will not use the payslips to evidence your income.
Working on a Fixed Term Contract is popular in certain industries. Similar to the other ways of contracting, we can still use the gross contract value with our lenders to prove your income.
Fixed term contracts can often be confused with being permanently employed. It is important not to confuse the two as the contract will have an end date and if your income is not presented in the right way it will cause issues with the lender you apply to. You will often find an ‘annual salary’ within the contract, however it will sometimes be ‘pro-rata’ depending on the length of the contract in question.
The mortgage lender can sometimes request your payslips alongside the contract to evidence your income. When assessing your mortgage application the lender will also look at the industry experience you’ve had to determine whether they can offer you the mortgage.
A common question we’re asked is if you need to have 12 months+ remaining on the contract to be considered. This is not the case with most of our lenders.
Every application is assessed on it’s own individual merits and factors such as length of time contracting and/or overall industry experience can help get your mortgage approved and get you a competitive mortgage deal.
Since the introduction of IR35, there has been an increase in the number of people changing the way they work. We have found that moving from outside IR35 to inside IR35 has caused some concern with contractors looking to apply for a mortgage.
To set the record straight, if you’ve recently changed from working through your LTD CO to working through an Umbrella Company we can still help. We look at ‘overall contracting experience’ and not the way you’re paid.
Firstly we’ll ensure you meet the criteria for what the lenders deem as a ‘Contractor’. Providing you meet this criteria, we will use your contract rate to calculate your income. Some lenders use different calculations, but below are some examples:
Day rate x Number of days worked per week x 48 weeks (to allow for time off throughout the year).
£300 x 5 x 48 = £72,000 per annum.
Hourly rate x Number of hours worked per week x 48 weeks (to allow for time off throughout the year).
£40 p/hour x 37.5 hours x 48 = £72,000 per annum.
This will depend on the lender we recommend, however in all cases the lender will need a copy of your current contract at minimum. Some may also require contracts covering the last 12 months.
Any contracts that are provided will need to be signed by all parties and also have terms and conditions attached.
Alongside this the lender will need to see your income being paid in your bank account, whether that be LTD CO account or personal account.
Yes. We do not ask for any accounts to evidence your income.
We have some lenders who can consider what’s known as a ‘day one’ contractor, which effectively means we can consider your income straight away with no contracting history.
Most lenders will require 2 years industry experience prior to you contracting to give them confidence that your income is going to be sustainable.
No. Most lenders will need to see at least 4 weeks remaining on the contract at the time you make your application. This can depend on the lender we apply to, but the remaining term on your contract will be discussed prior to application.
Usually your contract will only be for a period of 3-6 months, so we understand that having 6 months remaining would be impossible in most cases!
No. We ensure that you’re not penalised when it comes to the interest rates you’re charged just because you’re a contractor.
You will find that not every lender will accept contractors so this could reduce your options, but that’s where we come in! If we do find a lender who can accept your income, you’ll be charged exactly the same interest rate as anyone else.
In most cases yes.
We work with lenders who can consider gaps, we use our relationship with the lender to get them to take a view outside of their ‘normal lending criteria’.
They look at a number of different variables: How long was the gap? Why was the gap taken? How long have you been back in contract? Did you rely on credit cards / loans when out of contract?
We’re here to tell your story and will get any gap in contracts agreed by the lender prior to submitting an application. Lenders may ask for additional documentation to prove you can make the mortgage payments, but it does not mean your mortgage application will be impacted.
It is possible to use 2 contracts to prove your income, but only with certain lenders.
The lenders that will consider this will need to know how long you’ve worked on both contracts and how many hours you’re working a week. They will then assess how feasible it is for you to continue working both.
5th May 2023
Mortgages based on hourly/daily rate, we are experts with over 10+ years experience working with contractors.
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