Mortgages for Contractors
Looking for a mortgage as a contractor? The brokers we work with can help you get the best deal.
Firstly, as a contractor are you mainly Employed, or Self-Employed?
No impact on your credit score
Author: Pete Mugleston - Mortgage Expert, MD
Updated: December 10, 2021
The difficulty in getting a mortgage as a contractor stems from the fact that the definition of a contractor varies from lender-to-lender, but it’s not quite as complicated as it sounds.
This step-by-step guide will thoroughly detail everything you need to know about getting a mortgage as a contractor.
There are a number of options available which a mortgage broker will be able to help in guiding you through, and you can read up on them below.
The following topics are covered below...
What do mortgage lenders class as a contractor?
As seen through the eyes of a mortgage lender, a contractor tends to trade via a limited company and takes on one contract at a time, working for a period of between three and 12 months.
While they are working on the contract they act as an employee if registered through an agency, which may include umbrella companies or as a self-employed sole trader.
Mortgage lenders often consider a contractor’s income as more stable and reliable than freelancers as the latter involves more short-term contracts with multiple clients and therefore multiple streams of income.
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How to get a mortgage as a contractor
The way you’d go about applying for a mortgage as a contractor doesn’t differ too much from how to get a standard mortgage offer.
Your best bet is to use our free online service which will connect you with a mortgage broker based on your individual circumstances.
A broker who specialises in contractor mortgages will then be able to guide you through the application process and give you access to the best deal and rate through their contacts at various mortgage lenders.
However, you will still need to provide the standard information required from lenders such as income information, three months of payslips and identity documents.
As well as this, it is likely that you will also need to provide details of your contract such as the duration, pay and hours you will be working.
The approach lenders often take when assessing borrowing limits for a contactor mortgage is by working out your daily rate.
They will usually use 46 or 48 weeks of your contract rate to work out your annual gross income.
If you have a long-term full-time contract, then you may be able to demonstrate your mortgage eligibility to your lender for a longer period of time than what’s stated above.
The reason it is not 52 weeks is because they allow for holidays and periods where you may not have worked.
Try our contractor mortgage calculator below to work out your borrowing limits.
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.
Mortgage lender requirements
The main eligibility criteria lenders will refer to when looking to identify whether to offer a contractor a mortgage include the following…
This is in addition to the standard eligibility requirements that you will need to meet such as age, credit rating, income and the property type.
However, all lenders have varying eligibility requirements for their products, but a mortgage broker will be able to pair you with one that you meet the requirements of.
Credit score/ history requirements
Credit score and history are big factors in the accessibility of a contractor mortgage; however even with poor credit you will still be able to get a mortgage.
While you will be able to access a mortgage as a contractor with poor credit, it’ll likely have an impact on the rate you are offered and the amount of interest you’ll pay, as you’ll be viewed as a higher-risk borrower.
Once you have provided your Tax Calculations and Tax Overview from HMRC to prove your income and tax paid, a broker will be able to assess your individual situation and get you a rate you’re happy with.
The other key to being offered a contractor mortgage with poor credit at a low rate is a large deposit, which we’ll get to next.
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The minimum you will need for the deposit of a contractor mortgage is 10% of the purchase price.
This is the standard amount required for most specialist mortgage cases, as the lenders tend to view them as higher risk.
Although in some circumstances a mortgage broker may be able to find you a specialist lender who is willing to lower this amount.
However, if you do have a poor credit history or there are additional risks involved such as issues with your contract, then it is likely you will need 15% to 20% of the purchase price to progress with the mortgage.
Trading history requirements
Most mortgage lenders will expect you to produce 2-3 years’ accounts to evidence your income, but it’s possible to get approved with less than that.
Mortgage providers who cater specifically for contractors and fully understand their needs might let you borrow with 12 months’ trading history or allow you to take out a mortgage based on your most recent year’s accounts, which some people choose to do if they’ve had a particularly fruitful year.
Speaking to a broker is recommended if you have less than two years’ accounts.
Brilliant service from Daniel, very positive and put us at ease.
Daniel was fantastic , put us at ease and answered all our questions. Would highly recommend to anyone who is struggling to get a mortgage being a foster carer
Very helpful for contract workers
They were the only ones out there who seemed to be interested in our particular mortgage need – we’re both on short term contracts.
Ashley, the advisor assigned to us, was invalu...
They were fab and always on the other end of the line to discuss anything I…
They were fab and always on the other end of the line to discuss anything I needed to. Would recommend !!
Speak to an expert about contractor mortgages today!
Getting a mortgage is an important part of life and with our step-by-step guide, you are one foot closer to achieving this goal.
By using our free broker-matching service you can be paired with a whole-of-market mortgage advisor who specialises in contractor mortgages.
They will discuss your individual circumstances, and help you to find a solution that you’re happy with by identifying your most suitable lenders and the best mortgage deals that you qualify for.
Call us on 0808 189 0463 or make an enquiry to be connected to the right advisor for your situation. We don’t charge a fee, and there’s absolutely no further obligation or marks to your credit rating.
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Mortgage Expert, MD
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!