Zero Hour Contract Mortgages
Need to get a mortgage but worried your zero hours contract might make you ineligible? Read our guide to find out what that’s not necessarily the case.
Are you currently on a zero hour contract?
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Author: Pete Mugleston - Mortgage Expert, MD
Updated: December 14, 2021
If you’re currently working on a zero hour contract, you might be concerned this can impact your ability to secure a mortgage.
Although it can be a deterrent for some mainstream mortgage providers, there are lenders out there still willing to set you up with a loan.
This guide covers all the details you need to know about getting a mortgage if you’re on a zero-hours contract.
You’ll also learn about how you can prepare your application, and most importantly – where to find the lenders who’ll be willing to offer you a competitive deal.
Keep reading for all the essential information or click a link below to head straight to a specific section…
The following topics are covered below...
Can you get a mortgage on a zero hour contract?
Yes, this is possible. However, there’s only a limited number of lenders open to considering applicants with this employment type.
This is because they’ll need to assess your individual circumstances and then find the best way to provide you a mortgage. Unfortunately, certain lenders don’t have the resources to give this level of service to borrowers.
There are some lenders who will be willing to review your employment situation on a case-by-case basis.
This means that they can take into account specific income factors that are individual to you and your current (or previous) contracts.
Finding these lenders can be difficult, but it’s not an impossible task if you get the right advice.
Why it can be difficult
This is simply because it’s an added risk factor. Although your role might be secure and you may have been on your current contract for years, most lenders don’t look favourably on this type of income.
Mortgage lenders love stability and predictability, so their main worry would be that your contract doesn’t provide enough income security.
Because of this, plenty of lenders won’t have suitable products they can offer. And, some will increase the interest rate they’re prepared to offer in order to offset their perceived risk.
So, it’s important you’re able to speak with the right lenders who will understand your needs and income type; and still be willing to offer you competitive terms.
A broker can help you choose the right mortgage provider, but a good starting point is to work out how much you could potentially borrow.
Try our contractor mortgage calculator below to get a clearer idea of this.
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.
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How to get a mortgage on a zero hour contract
Even though each application will be unique, here are some practical steps you can take to secure a mortgage:
Step One: Gather your documents and income history
Because your income might be perceived as less stable, it’s important you have as much evidence and documentation as possible.
Gather as many payslips as you can for your current contract and previous contracts (depending on the timeframe), going back multiple years if you’re able too. And, try and have your P60s to hand.
It’s also worth getting hold of supporting documents such as the employment contract itself.
You’ll also need to provide your proof of ID (such as a driving licence or passport), a proof of address (like a utility bill), and assemble any relevant information detailing other sources of additional income.
Step Two: Download your credit reports
Before you begin to approach lenders and apply for a loan, it’s crucial to download all your credit reports first.
Doing this ahead of time means that you can spot any errors or mistakes and potentially avoid a rejection or unnecessary blemish on your credit file. This step is even more crucial if you’re on a zero-hours contract.
Ideally, it’s best to have an experienced advisor evaluate these scores with you.
This is because they’ll be able to flag up any problems or concerns and tell you what lenders will and won’t be willing to accept.
Don’t fret if you’ve got bad credit either, a skilled broker can still help.
Step Three: Speak to an expert broker
The number of lenders willing to consider mortgage applicants on temporary or fixed-term zero-hour contracts is fairly small.
On top of this, lenders who will consider applications often won’t advertise these deals. Others will even require that you’re introduced to them through a trusted broker.
Having an expert broker by your side means speaking to the most suitable lenders from day one.
You’ll also benefit from their support and guidance throughout the whole application process.
This is going to make your life much easier, ensuring that you end up with an ideal outcome and the best possible deal.
The brokers we work with have plenty of experience securing mortgages for applicants on zero-hour contracts.
Just make an enquiry and we’ll introduce you to an expert broker for free.
Which lenders will consider your application?
As mentioned, it can be a difficult task to find lenders willing to offer loans if you have a complex pay structure.
But, it can still be possible to get deals similar to the best market interest rates on offer, which at the time of writing are between 1.5%-2.5%.
Here are some examples of lenders who are willing to at least discuss the possibility of providing a mortgage:
- Halifax – as long as you’ve been on a contract for over 12 months (for the same employer or in the same line of work).
- Suffolk Building Society – if you can provide at least 18 months of your employment history, they’ll consider your application.
- Barclays – you must have been contracting for at least 12 months, have at least 3 months remaining on a fixed-term contract, and no more than a 6 week gap at any time during the last year.
These are just to show you that discussions can be had, but each lender will look for different things in an applicant on a zero-hour contract.
Using a specialist broker means you can view your full range of options. Then, choose the mortgage solution that suits your circumstances.
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Factors that impact your eligibility
Alongside meeting much of the standard eligibility criteria for a regular mortgage, the nature of your employment contract can lead to some distinct differences, with other elements playing a role in the process.
Here’s some examples of factors that could play a part in a lender’s assessment of your application as a zero-hour contractor:
- Minimum length of employment: each lender will have their own rules around the minimum number of months you need to provide proof of income for. This can range from 1 year all the way up to 3 years. So, it’s vital you deal with the lenders who’s criteria fits your contract history.
For certain mortgages, there will be restrictions around the number and length of any gaps in your contract employment history.
Some will permit gaps under 6 weeks, others will only allow up to 2 weeks. And, a few lenders will only consider you if you’ve been continuously enrolled in a contract.
Some lenders will only provide a loan if you’ve been on a continuous fixed-term contract with one employer.
Whereas others will still consider you if you’ve worked for different employers, or been on multiple contracts.
Work experience and industry:
lenders will want to take a deep dive into your back catalogue of experience, potentially before the beginning of your current contract.
The nature of your work can also make an impact. In some situations requiring a smaller period of income proof if you’re a working professional in certain fields (e.g. doctor, solicitor), or a key worker (nurse, carer, supermarket worker etc.).
Structure of the income:
some lenders won’t allow bonuses, overtime, or commission to be included in the calculations.
Others will only allow zero hour contract pay if it’s your secondary income.
A handful of lenders will only include up to 50% of your contracted pay in their affordability assessment.
So, if your income is complex, it’s worth dealing with the lenders who’ll take your full range of pay into consideration.
Because your payment structure can be perceived as a higher risk from an income perspective, some lenders will ask for a larger deposit than the 5-10% you’d normally need for a standard residential mortgage.
There will be other lenders who have an upper limit on the LTV (loan-to-value) ratio they can offer (75%-80% with some).
But, it can still be possible to get mortgages with up to a 95% LTV under the right circumstances.
Also, if you can afford to put down a bigger deposit for a lower LTV ratio, certain lenders will offer you more competitive borrowing terms.
Good credit scores will always serve you well in any mortgage application.
But, they can be even more important when you’re on a zero-hours contract. Don’t fret if you’ve got a bad credit rating either.
But, it is worth using a broker who can introduce you to the lenders comfortable dealing with bad credit applicants.
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Speak with a zero hour contract mortgage specialist
Every mortgage will have varying rules and restrictions relating to what they’ll want from an applicant on a zero-hour contract.
Using a specialist broker is going to make sure that you’re introduced to the lenders who’ll offer the best terms based on your specific income situation.
We offer a free broker-matching service.
This just means we’ll quickly assess your needs and type of employment contract.
Then, we’ll pair you up with a specialist broker who has a strong track record securing mortgages for clients on zero-hour contracts.
Just call 0808 189 0463 or make an enquiry. Our service doesn’t cost you anything and we’ll set up a free, no obligation chat between you and your ideal broker today.
Get Started with a Broker
Maximise your chance of approval with specialist advice from a mortgage expert.
Yes, this is possible. But, there will be some extra considerations.
Most importantly, if you have previous experience with a buy-to-let (BTL) property, or if it’s your first time as a landlord. Either way, mortgages can still be arranged.
Your best way of seeing all available options will be by using the services of an experienced mortgage broker.
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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!