More people than ever are working as contractors. And why not? It can give you the independence and flexibility to choose your own clients and projects, while still giving you plenty of time for hobbies and personal commitments. You can also earn some seriously good money!
On the flip side, it can bring uncertainty. Banks can sometimes see you as higher risk, due to the irregularity of your income. This can make getting a mortgage a little more tricky, but that doesn’t mean it can’t be done!
In this Guide, you’ll find everything you need to get a mortgage as a contractor. We’ll explain what you need to prepare, how to improve your chances, which lenders to choose and more.
Yes, it’s definitely possible to get a mortgage as a contractor! But sometimes it can be a little more tricky compared to someone in straightforward employment.
We think contractors are awesome. But some mortgage lenders feel differently. They won’t take the time to understand your income. They may even tell you it’s not possible, when it is. That’s because most mortgage lenders favour people who have tidy incomes from their regular salary. We don’t think that’s fair.
Our Mortgage Experts have plenty of experience getting mortgages for contractors. Make an enquiry to find out your options.
This may seem like a silly question, but the definition of a contractor can vary between mortgage lenders. And that means the lending criteria can vary too.
A contractor is usually someone who:
Is self-employed, but works for one company at a time
Is working full or part-time on a single fixed-term contract, for a set period of time
Companies commonly use contractors if they need someone with specific skills or to fill a particular role for a certain period of time. They’re not formal employees of the company they’re working for. But they sign a contract with the company that specifies the work they’ll be carrying out for a period of time. This means contractors aren’t considered to be employees, so they won’t receive employee benefits. But they can charge the business far higher fees to make up for it. Cha-ching!
Whether you’re a contractor, a freelancer or an employee looking to get on the property ladder we can look at your mortgage options. Make an enquiry to speak to one of our Mortgage Experts.
When applying for a mortgage as a contractor, lenders will look at the same criteria as an employee. This includes your age, income and credit score. Lenders may also ask you the following questions to ensure you can afford your monthly repayments:
What type of contractor are you?
How long have you been contracting for?
Have you had any previous contracts renewed, or not?
How much experience do you have and how much time have you served in your field?
How long do you have left on your current contract?
Read more in our Guide: What Mortgage Lenders Look For In Mortgage Applicants.
As a contractor your income will be assessed slightly differently from an employee. But it’s nothing to worry about.
Some lenders will calculate your annual income based on the day rate you charge. If you’ve recently left employment to work as a contractor this can be really helpful, but they may need supporting evidence. This could include your qualifications, evidence of prior employment and any signed contracts. It’s a good idea to get these ready in advance!
Most lenders will work out your annual income from your day rate, allowing for holidays and any gaps in your work. They’ll usually assume you work 46-48 weeks out of the year. This can sometimes work in your favour, but not always. Especially if you’ve been working as a contractor for a long time.
For this reason, it can be a good idea to go to a lender that calculates your income by taking an average of the income you’ve earned over the last two or three years. For this method, lenders add together your earnings from the last two or three years and then divide by the number of years, to work out how much you can afford to repay each month.
For example you may have earned £30,000 one year and £35,000 the next, so the average earnings over the two years would be £32,500. It’s worth bearing in mind that if your earnings have gone up or down significantly year-on-year lenders are unlikely to assess you this way.
In some cases lenders might take your lowest-earning year, or most recent year as an indication of how much you earn. That’s why it’s best to go with a flexible lender that understands your unique situation.
Start an enquiry with us and one of our Mortgage Experts will find the right lender for your current circumstances.
Working out how much you can borrow as a contractor can feel daunting. Your income might vary from month to month. But this doesn’t always matter. Often, the amount you can borrow won’t differ too much to what a full-time employed applicant can borrow.
Lenders will normally carry out an affordability check to work out how much they can lend you. As a contractor, this is at least three times what your yearly earnings are. But sometimes mortgage lenders will let you borrow up to four and half times your earnings.
To get the best possible outcome you’ll need to show lenders evidence of your earnings for at least the last six months. However, they might ask for two or three years’ worth. This can be difficult if you’ve just started working as a contractor, but you still have options.
Specialist mortgage brokers can help you to find a contractor-friendly lender to get approved for a mortgage, based on the terms in your current contract or day-rate.
Mortgage lenders will also look at other affordability criteria such as how much deposit you have, any existing financial commitments (including debt repayments and fixed outgoings) and your credit history. They look at this criteria with employed and freelance applicants too.
To find out your options and get advice on how much you’ll be able to borrow, start an enquiry.
How much deposit you’ll need to put down will depend on your individual situation, and will vary between mortgage lenders. But remember, the more money you put down as your deposit, the more of the property you’ll own right away, and the smaller your mortgage needs to be.
Mortgage lenders have their own criteria to work out how much of a risk it would be to lend money to you. But it’s not that different for a contractor than those employed full-time. Most lenders will ask for a minimum 10% deposit for a typical residential mortgage.
How much you can borrow will not only depend on your loan to value, but also your earnings track record, and how long you want to commit to a fixed-interest rate for. You may be able to borrow more if you commit to a longer fixed interest rate because the lender will have confidence you can repay a set monthly amount ongoing.
Read more in our Guide: Mortgage Deposits and Income Multiples Explained.
More people than ever are working on zero-hour or casual contracts. These are contracts where the business doesn’t guarantee the contractor any hours of work. This can make getting a mortgage more difficult. But it’s certainly not impossible.
Most mortgage lenders, particularly high-street banks, require contractors to be in full-time work. They want a guarantee you’ll have a regular stream of income to meet your monthly repayments. But this viewpoint is changing. With the upward trend in zero-hour contracts there’s now more lenders than ever that specialise in this field - there’s even specialist zero-hour contract mortgages. This means with the right approach, the chances of getting a mortgage are higher than they’ve ever been.
A key part of getting any mortgage is showing lenders you’re ‘low risk’. We know this is harder as a zero-hour contractor, so here are some tips:
Offer a larger deposit: A bigger deposit means lower risk.
Show them your detailed employment history: You may have been with the same company or sector for the last few years. This can show lenders your employment is safe and expected to continue.
Show lenders your earnings: Being on a zero-hour contract doesn't mean you don’t earn good money. You may also have some savings in the bank. This is your opportunity to show lenders you’re a savvy saver and can afford to pay back the loan.
Whatever contract you’re working on, we've got a team who'll take the time to listen and understand your unique situation. Make an enquiry.
Being a contractor shouldn’t stop you from getting a joint mortgage. But knowing what to look out for may help speed up the process.
If you’re a contractor and looking for a joint mortgage, lenders may be more willing to lend if your partner, family member or friend is in full-time employment. Changes in your income level will be less important if you’re buying with someone else, but you’ll still need to show some consistency in your earnings. If you can’t do this, you still have the option to consider a guarantor mortgage.
For guarantor mortgages you can ask a parent or family member to provide a guarantee on your mortgage against their own home. This means your chances of being accepted for a mortgage will improve. You may be able to borrow more than you would on your own and could even qualify for lower interest rates. Read more about guarantor mortgages in our Guide: Guarantor Mortgages Explained.
Getting a mortgage as a contractor can be more challenging than if you were employed. But it’s still possible.
Here’s some easy steps to increase your chances of being accepted:
Offer to put down a higher deposit to minimise your risk to the lenders.
Take a look at your credit score to decide whether you need to improve it first before submitting an application.
Gather as much evidence as possible to show your earnings over the last few years. This should include your invoices, bank statements and any other accounts.
If you’re the Director of a Limited Company, you’ll need to show your full business accounts and balance books.
Provide evidence of your current and previous contracts, as well as qualifications and previous experience.
Try and minimise your time off in the lead-up to buying a home. Lenders may see it as a red flag if you’ve been out of work for more than eight weeks in a 12-month period.
Speak to an expert broker that has strong relationships with lenders that specialise in getting mortgages for contractors (see below)
Below are some mortgage lenders who offer contractor mortgages. It’s important to note that there aren’t the only lenders to choose from - our Mortgage Experts can advise on who'll be the right lender for you.
Halifax accepts applications from all occupations and doesn’t require a minimum income for contractors. They’ll even consider overseas contractors without permanent residency. Halifax calculates income on a current day rate over 48 weeks.
Bluestone is one of our specialist partners who try to and try to solve long-term problems with quick solutions. They have a flexible lending criteria for contractors accepting income calculations based on your current day rate over the last 48 weeks. Plus, they allow a six month gap in earning if you’ve been contracting for 2 years or more.
Kensington is flexible towards contractors who have gaps in their work history. They’re also very understanding if you have bad credit. They calculate your income based on what your day rate average is for the past year. That’s super helpful if you’re a contractor, so you don’t have to give three year’s worth of bank statements.
4. Leeds Building Society
Leeds Building Society is also quite flexible when it comes to contractors with employment gaps. They accept up to a 6-week gap between contracts and require a lower minimum income than most lenders. They also offer exclusive offset rates just for contractors. Income is calculated upon actual weeks and rates worked over 12 months.
Check out our Mortgages for Contractors page for plenty more info.
Our Mortgage Experts are fully-qualified with experience in bad credit, self-employed and complex mortgages. They have a proven track record of getting mortgages for people who’ve been rejected elsewhere.
Our calculators give you an idea of what you might be able to borrow, what's affordable and a rough estimate of the kind of property prices you can start to look at.