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Can I get a mortgage as a contractor?

  • Yes, you can get both residential and contractor buy to let mortgage deals.
  • The best contractor mortgage rates are often available from high street banks.
  • We offer contractor mortgage advice based on your specific circumstances.
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Contractor mortgages

What is a contractor mortgage and are they difficult to secure?

Securing a mortgage as a contractor can be a tricky business, as lenders and customers are historically ill-informed about contractor mortgages. The common perception of contractor mortgages is that they come with lots of stipulations and hurdles to overcome before being granted. While this is undoubtedly true in certain cases, in most cases all we need is your signed contract as proof of income.

For a number of contractor friendly lenders, applicants only need to supply some form of identification, bank statements and a copy of the contract in order to obtain approval, making the process fairly stress free for all involved. However, the criteria vary from lender to lender, so expert advice helps to make sure that the most suitable lender is chosen.

Can contractors get a mortgage?

Contractors often find that when they speak to a bank or building society, the lender’s advisor is asking them for 3 years limited company accounts or 2 years contracting history. It doesn’t have to be this way.

Even a few years ago, there were only a handful of lenders who had specific contractor mortgage criteria.

Everyone else was just assessing contractors based on self-employed lending criteria. This situation, however, has drastically changed during the last two years, as more lenders introduced contractor lending criteria and there are now dozens of lenders to choose from.

Yet, if you are thinking of going directly to a bank, you may find it hard to get your mortgage approved based on contract income. On the other hand, we offer bespoke contractor mortgage advice and will be happy to arrange the mortgage for you.

How is contractor income assessed?

An often overlooked fact is that contractors actually stand more of a chance of securing their desired mortgage than other kinds of borrowers.

This is because lenders are able to assess their income based on limited company accounts, umbrella company payslips or on a contract daily rate. This ultimately gives more mortgage options and flexibility in securing the best mortgage deal.

Based on Ltd company director income

Most contractors work through their limited company, so can be assessed based on a combination of salary + dividends or profit + salary. This is an option just like for any other Ltd company director.

Based on umbrella company payslips

Alternatively, if you get paid through an umbrella company and receive payslips with tax and national insurance deductions, then your income can be assessed like an employee’s income, i.e. based on the payslips.

Based on the contract rate

This option is what sets contractors apart. Lenders with contractor lending criteria would use the annualised hourly or daily rate as a basis for calculating how much contractors can borrow. For example:

  • hourly rate x 37.5 hours per week x 46 or 48 weeks or
  • daily rate x 5 days x 46 or 48 weeks

These calculations may be personalised based on the hours or days worked per week, but they also allow for holidays, short breaks between contracts and even the break around Christmas.

Some lenders would use a slightly different income calculation. They may take 52 weeks’ income to use in their mortgage affordability calculator or they may average the daily rate over the last 12 months.

Applying our experience and knowledge, we check which income calculation method gives us the required mortgage amount, so we can recommend the best mortgage deals to you. What’s more, we have the expertise to present a case as appropriate to secure the mortgage based on just your daily rate.

Contractor buy to let mortgage

When applying for a buy to let mortgage, contractors have the same advantage of being able to use different income assessment methods.

It is true, that lenders will first use the rental income to calculate how much mortgage you can get. In addition, they also often ask for a minimum £20k-£30k annual earned income.

This is normally ok for contractors who take out salary and dividends in a way to stay in the basic tax rate payer bracket.

However, sometimes the rent is not enough by itself to achieve the required mortgage amount. If the lender allows for earned income to be used to secure a higher mortgage amount, then contractors can either use their Ltd company income or the contract rate-based assessment.

Building on our experience, we offer specialist contractor mortgage advice, including buy to let mortgages for contractors. Contact our friendly team for further information and to help you build an investment portfolio.

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Can a contractor get a mortgage with...

  • less than a year contracting history?
  • 5-10% deposit?
  • less than a month remaining on the current contract?
  • a few months break between contracts within the last year?
  • an offset facility?

Yes. You can get a contractor mortgage even in the above circumstances. Gives us a call and we can secure a mortgage based on your individual circumstances and requirements.

Special circumstances

Customers tend to ask about certain aspects of borrowing, so you may find these sections useful as well. After all, things can be a bit tricky sometimes.

Ltd company buy to let mortgage

Contractors often find that they have a significant sum accumulated in their limited company. If you are considering your investment options, buy to let may be one of them. Although most lenders

Although most lenders would prefer (or even require) that a limited company used for purchasing and holding a buy to let property is specifically set up for this purchase, many will accept limited companies that are used for non-property related businesses.

Contractor with poor credit history

Having bad credit history can make it more difficult or even jeopardise your plans to get a mortgage. However, there are specialist lenders who accept people with poor credit history and even have contractor criteria to assess your income based on your contract rate. Their mortgage lending criteria allow for defaults, CCJs or even missed mortgage payments, but be prepared for higher interest rates than what you could get without past or current credit issues.

First time buyer contractor mortgage

As a contractor, you have several different ways to have your income assessed, as mentioned above. Likewise, as a first time buyer, you can choose from several purchasing schemes and now even have government help with the stamp duty. Combining these two aspects means that the world is your oyster and lenders will be happy to have you as a customer. You can learn more about your first time buyer options by clicking through to our guide.

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Looking for a contractor mortgage calculator?

Our “How much can I borrow?” calculator below has a contractor section that takes into account your contract daily rate. It is a good starting point to get an idea of your borrowing potential.

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How much can I borrow?
Mortgage payment calculator
Stamp Duty Calculator Icon Small
Stamp duty calculator
Buy to Let mortgage calculator
Offset mortgage calculator
Mortgage overpayment calculator
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