Contractor Mortgages

Can I get a mortgage as a contractor?

Yes, it’s possible, but it’ll be more difficult compared to someone who’s in full-time employment. Most mainstream mortgage lenders might want you to provide accounts for the last few years, and prove that you’ve got stable work for the future. 

In some cases, contractors don’t need to have three years’ worth of accounts and can even get approved for a mortgage based on their day-rate. You’ll just need to find a specialist mortgage lender that understands the nature of contract work, and is willing to review your application based upon the terms of your current contract.

And even if you’ve only just started contracting, and therefore have no accounts, you still have options that our Mortgage Experts can explore for you. Get in touch to find out your options.

Am I classified as a contractor?

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 either: 

• Self-employed, but works for one company at a time

• 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.

What do I need to do to apply for a mortgage as a contractor?

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.

How will my income be assessed as a contractor?

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.

How much can I borrow as a contractor?

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 (like us!) 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.

What deposit will I need as a contractor?

How much deposit you’ll need to put down will depend on your individual situation, and will vary between mortgage lenders, but in most cases, a minimum 10% deposit is required for a residential mortgage.

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. This will make you a more attractive applicant to a larger group of mortgage lenders.

Can I get a joint mortgage as a contractor?

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.

How can I boost my chances of getting a mortgage as a contractor?   

Getting a mortgage as a contractor can be more challenging than if you were employed. But it’s still possible. Here’s some simple 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.

• 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 experienced mortgage broker who has strong working relationships with lenders that specialise in getting mortgages for contractors (see below)

Mortgage lenders for contractors

Below are some mortgage lenders who offer contractor mortgages. It’s important to note that these aren’t the only lenders to choose from - our Mortgage Experts can advise on who'll be the right lender for you.

Halifax

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

Bluestone is one of our specialist partners who 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 earnings if you’ve been contracting for 2 years or more. 

Kensington

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.

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.