Getting a Mortgage in an Umbrella Company
Looking for a mortgage as an umbrella company contractor? The mortgage brokers we work with can ensure you get the best deal.
Do you currently work through an umbrella company?
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When the amended IR35 tax law came into effect on April 6th 2000, many contractors and freelancers turned to umbrella companies to simplify dealing with HMRC, how they pay themselves and invoicing.
While there are significant benefits to working through an umbrella company, it can throw up some obstacles when it comes to getting a mortgage.
In this article we’ll talk about the pros and cons of working through an umbrella company, from a lender’s perspective, and tell you how to get a mortgage for umbrella contractors.
Read on or jump straight to the topic that’s relevant to you…
The following topics are covered below...
Can you get a mortgage as an umbrella company contractor?
Yes it’s possible, but there are relatively few mortgage providers who offer mortgages for contractors, agency staff or other professionals working through an umbrella company.
The reason for this is that defining your source and level of income can be difficult, which means they may not be able to access the affordability aspect of your mortgage application.
The problem lenders have is that many umbrella company workers are often paid the minimum wage, which is then topped up by such things as commissions and bonuses.
For this reason, you should talk to a mortgage broker who specialises in finding a mortgage for umbrella company workers.
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Maximise your chance of approval with specialist advice from a mortgage expert.
How to get a mortgage if you work for an umbrella company
Here are the steps to follow to make sure your application gets off to the strongest possible start…
- Get your proof of income documentation ready
Make sure that you have your contracts and remittance slips ready to present to the mortgage provider.
You’ll also need proof of ID and proof of address – see our guide to mortgage applications to find a full list of the paperwork you’ll need.
- Make sure your credit report is in the best possible shape
You can use credit reference agencies, such as Experian, to help you flag up any potential problems, before your lenders do their own credit search.
Their services are free and well worth the time. You can download your files from each of these agencies via our credit reports hub – be sure to have any incorrect information removed or amended before you apply.
- Speak to a mortgage broker
Speak to an experienced mortgage broker who specialises in umbrella company contractors, and start preparing your mortgage application sooner, rather than later.
Having all the information the mortgage provider will need at your fingertips will help your application go smoothly.
We offer a free broker-matching that will quickly assess your needs and circumstances to pair you with a mortgage advisor who specialises in umbrella contractors – make an enquiry to get started with them today.
How much you could borrow
The majority of mortgage providers (remember there is a limited pool of lenders for umbrella company workers) may lend up to 4.5 times your income, while others could extend that to 5 times your income, and a few may accept 6 times your income.
All lenders are different, but the average mortgage-to-income ratio is around 4.5 to 5 times your income.
Try our contractor mortgage calculator below to get a rough idea of the amount you could potentially borrow.
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.
What are the eligibility requirements?
The eligibility criteria for umbrella company mortgages is pretty much the same as any other borrower looking for a mortgage, with a few extra conditions to meet.
The general requirements are as follows…
- Affordability: Can you meet the monthly repayments over the full term of the mortgage? Each lender is different when it comes to determining affordability. It’s based on your income and your outgoings.
- Your deposit: Putting down the largest deposit you can will increase your chances of securing a mortgage. Most lenders require a minimum of at least 5-10% deposit. Your choice of lenders will increase significantly if you have 15%, and if you have 20% or more, the deals on offer will be much more attractive.
- Your credit history: A clean credit rating shows the lender that you are financially responsible, so they are more likely to approve your application. But there could still be options if you need a bad credit mortgage.
Extra requirements for umbrella company contractors include…
- Work history: Mortgage lenders like stability, so if you’ve been set up with an umbrella company for 12 months or more, it will help your mortgage application.
- Contract renewals: If you’ve had your contract renewed at least once, lenders will look more favourably on your application.
- Multiple contracts: If you’re working for a number of clients (including umbrella companies), you may find that some lenders will accept income from only one source. Other specialist lenders are OK with multiple income streams, so talk with a mortgage broker who specialises in this area, and they can point you in the right direction.
- Age: You usually need to be over 25 years old to be considered for a mortgage if you work for an umbrella company.
What if you have bad credit?
As an umbrella company contractor, a bad credit history can compound the problems you may experience when applying for a mortgage, as well as reducing the number of lenders prepared to consider your mortgage application.
A mortgage broker who specialises in people with bad credit histories may be able to help you.
Depending on the severity of the adverse credit, they may be able to find a specialist ‘bad credit’ mortgage provider, who could consider a mortgage application from an umbrella company contractor with a poor credit history.
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Get match with a broker who specialises in umbrella company mortgages
Using an umbrella company can take much of the hassle out of running your contractor or freelance business, but there are some barriers to overcome when applying for a mortgage, but with the right advice it’s quite possible.
If you meet the mortgage provider’s criteria outlined above, there is no reason you shouldn’t be able to apply for a mortgage if you are an umbrella company contractor.
But it is essential that you talk to an experienced mortgage broker who specialises in mortgages for umbrella company contractors, someone who will provide the right advice and find you the best mortgage deal and one that suits your own individual financial circumstances.
We offer a free broker-matching service that will pair you with a mortgage advisor just like this.
Call 0808 189 0463 or make an enquiry and we’ll set up a free, no-obligation chat between you and them today.
Ask a quick question
We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.
Pete Mugleston
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!
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