Can I get a mortgage if I work as a contractor?

Which contractors can we help?

1. Self-employed Contractor Mortgages: Typically for those deemed outside IR35. Self-employed contractors operate through a limited company. This poses issues as lenders will typically want to assess a self-employed contractor on traditional underwriting, which requires 3 years of accounts and only takes the salary and dividend being paid into consideration in most cases.
2. Umbrella Contractor Mortgages: Contractors working through an umbrella company often face more challenges in obtaining a mortgage compared to others. Most high street lenders do not understand these types of contractors due to the difficulty in assessing their income. Umbrella company payslips typically break down the income into various payments including, holiday, bonus and commission which is often deemed non-guaranteed and therefore either ignored or reduced when assessing affordability.
3. Locum Workers: Despite working in a sector where work is almost guaranteed. Locums can find obtaining a mortgage difficult due to lenders’ assessment of total income. Self-employed locums working via a limited company will again be asked to provide 3 years accounts whilst umbrella locums suffer the same fate as contractors.

Fortunately, there is another way. My Contractor Broker are specialists in helping contractors obtain mortgage funding based on their contract day/hourly rate or in some cases, invoices. By focusing on contract value, we can remove the need for company accounts or payslips and get your income assessed on your true level of income.

What other types of contractors can we help?

1. Fixed & Short-Term Contractor Mortgages: Contractors on fixed or short-term contracts can find it easier to secure a mortgage. Those who have been trading for a longer period and have had their contracts renewed at least once are in a better position. However, if the contract has never been renewed, the number of lenders willing to offer a mortgage may be limited.
2. Zero-Hour Contractor Mortgages: Workers on zero-hour contracts may find it more difficult to prove their regular income to lenders since they are not guaranteed a minimum number of hours each week. Many high street lenders consider them high-risk and may decline their applications. However, it is possible to find suitable lenders.
3. Agency Workers Mortgages: Agency workers are considered low risk by mortgage lenders due to the rights they enjoy under the Agency Workers Regulations. Provided you have more than 12 months of experience working in this capacity, finding a willing lender should be possible.

How much can I borrow as a contractor?

The amount you can borrow as a contractor depends on your individual circumstances and the lender’s policies.

There are typically 2 key issues locums, self-employed and umbrella contractors face when engaging with a lender or non-specialist mortgage broker. 1) evidencing your income and 2) the perceived risk due to the longevity of your work.

My Contractor Broker has bespoke underwriting arrangements in place allowing both issues to be overcome:

By utilising your contract, contractor-friendly lenders are prepared to take the day rate over a 5-day week and a 46/48 year. As an example, a contractor earning £700pd will have income assessed as £700 x 5 x 46 = £161,000 regardless of the income stated on the company accounts or umbrella payslips.

A copy of your CV will be used to show your career history, skills and experience. By providing a detailed history of your work the underwriter should be prepared to ignore any end date on your contract due to your ability to secure future work.

Any tips or advice?

To increase your chances of securing a contractor mortgage, consider the following tips:

• Seek advice from experts: My Contractor Broker are specialists in the contractor mortgage market. We have years of experience in helping contractors secure mortgage funding even after a declined application.

• Ensure contract paperwork is up to date: Make sure all your contracts have accurate details recorded. Lenders are interested in your contract rate and duration as evidence of your income and long-term prospects as a borrower.

• Avoid long breaks between contracts: Consistency is important to lenders. Try to avoid lengthy gaps between contracts. Mortgage lenders prefer stability and view breaks of 6 weeks or longer between contracts as a risk factor.

• Aim for a high deposit: Putting down a deposit of 10% or higher increases your chances of approval. Additionally, higher deposits often result in lower interest rates.

• Ensure affordability: Consider your financial commitments and outgoings to determine what you can realistically afford to pay each month. Keep in mind that interest rates may fluctuate, so consider whether you can still afford repayments if rates rise.

What Next?

If you are a contractor seeking a mortgage, it is highly recommended to consult a mortgage broker specialising in contractor mortgages. High street lenders may not fully understand the complexities associated with contractors, resulting in unfavourable rates or rejection. My Contractor Broker have access to the best lenders in the market and can help you find the right mortgage for your needs.

For assistance in securing your contractor mortgage, feel free to reach out to the team at My Contractor Broker on 02394 211122 or use our contractor mortgage calculator below to find out how much you could borrow.