Contractor Mortgages

Experts in Mortgage Advice
Dozens of Mortgage Products available
Fee-Free mortgage advice

Get in touch for an initial free, no obligation chat with one of our advisers to see how we could help you.

1 Step 1

Home » Contractor Mortgages

Contractor Mortgage (Part 1)

Carly Ashburner joins us to explain how the mortgage process works for contractors in a two part episode. Part one of two, recorded in September 2024.

Can contractors get a mortgage? How long do you have to be a contractor to get a mortgage?

Yes, absolutely. Lenders will want 12 months in a contract in the same field. If your contract has been renewed with the same employer, that’s great. They will also want to see a minimum length of three months left on a contract. If it’s less, some lenders will accept confirmation from the employer that an extension is expected.

What are the lending criteria for contractors and how will my income be assessed?

If you’re a day rate contractor, lenders will use that and calculate the number of days worked per week by 48 weeks or 52, depending on which lender we use. Otherwise, lenders will assess your pay over the last three months and use your P60 to verify this.

What documents do I need to get a mortgage as a contractor? What do we need to prepare?

You’d need ID, which would be a passport or a driving licence. Then, proof of address which could be a utility bill, a credit card statement or a bank statement dated within the last three months.

We also need a copy of your latest contract confirming your contract rate. Some lenders will ask for your latest CV, to know your recent working history. You should also gather three months’ bank statements to show your earnings.

Can I take out a contractor mortgage with another person?

Yes, of course. Every lender will have their own method of assessing the other person’s income, whether they are employed or self-employed or another contractor. But yes, absolutely, you can take out a joint mortgage with someone.

What deposit will I need as a contractor? Will I need a bigger mortgage deposit than usual?

There’s no requirement for a larger deposit if you’re a contractor. You can obtain a mortgage with as little as a five percent deposit.

How much money can I borrow as a contractor?

Lenders will assess your income and multiply this by 4.5 or five, depending on the lender.

How do I get a mortgage if I contract under a limited company?

Lenders will still want to see a copy of your contract. They will assess your rate of pay from that.

What if I’m on a day rate? How does that work?

For a day rate contractor, lenders will use your day rate and multiply that by the number of days worked per week – usually five. Then they multiply that total by 48 weeks or 52 weeks, depending on which lender we use.

Can I get a Buy to Let mortgage as a contractor?

Yes, absolutely. Buy to Let mortgages are assessed slightly differently, in that the lender will determine the Loan to Value ratio based on the expected rental income of the property. They will need to ensure you meet minimum earned income levels.

Can I get a contractor mortgage with bad credit?

Yes, there are lenders we can approach for mortgages if you have a history of bad credit. However, you will have fewer lenders to choose from and interest rates are likely to be higher.

Do you have any final thoughts before we return for Part Two?

Every situation is personal and I would always advise you to speak to a broker to receive individual advice.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

MOST BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

Speak To An Expert

Whether you’re buying your first home, expanding your portfolio or looking for insurance to protect your loved ones, our friendly service and expert know-how can help ensure you get the most suitable solutions for you.

Contractor Mortgage (Part 2)

Continuing the conversation on mortgages for contractors, with Carly Ashburner.

Are there any government schemes for contractors?

Government schemes such as the Lifetime Individual Savings Account, or LISA, shared ownership and help to buy are all available to contractors.

In terms of interest rates, the same rates apply for the employed, self-employed and for contract workers, so there’s no difference there.

What if you’re a subcontractor? How does the mortgage process work?

Most lenders will require 12 months’ worth of working history to consider a mortgage. However, some will consider you with less than six months.

Some will even consider you if you have only just started working as a contractor, providing you have a track record within the same field on an employed basis.

Can you get a mortgage as a contractor inside IR35?

Yes, IR35 only affects the way you’re taxed. For mortgage purposes, you will be assessed the same way as before, depending on whether you operate through a limited company or an umbrella company.

Can I get a mortgage on a temporary contract?

Yes. It’s possible to get a mortgage on a temporary contract. It depends on your circumstances and history. A solid employment history with a steady income increases your chances of obtaining a mortgage, and will make you more attractive to lenders.

Can I get a mortgage on a zero hours contract?

Yes, although lenders tend to be more strict when assessing applicants on zero hour contracts. They will look to ensure your income is sufficient to cover the repayments.

Zero hour contract workers can experience fluctuations in pay, so your employment history will need to demonstrate a steady income.

Can I get a joint mortgage as a contractor?

Yes, the lender will assess the other applicant’s pay and decide on a loan based on your joint incomes.

How does the remortgaging process work as a contractor? Any differences here?

There’s no real difference. Your income will be assessed in the same way as for a new mortgage.

What do I need to do to apply for a mortgage as a contractor? Should I find a specialist mortgage broker to help?

It does really depend on individual circumstances. You should certainly use an experienced mortgage broker who understands your income, and knows which lenders would be suitable for your situation.

What steps can I take to strengthen my mortgage application as a contractor? Any top tips here?

Yes – make sure all your paperwork is in order and you have a copy of your most recent contract. Stability of employment is really important, as lenders want to see a 12 month history of contracting in the same field – and also a minimum of three months left on your existing contract.

Also, keep an eye on your credit report and ensure any repayments or loans or credit cards are up to date. If you can, avoid taking out any new credit agreements in the run up to your mortgage application, because these can affect the loan size granted.

What else do we need to know about mortgages for contractors?

Every situation is different, so do always speak to a broker to receive individual advice.

YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR PROPERTY. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Useful Links

Why First Thought Financial

If you are looking for a mortgage or life insurance, call us today on 01923 606808 or complete our short enquiry form.

We’ll be pleased to help you.