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Sarah Robinson - Buy to Let
I am a return customer as Peter Bartlett and the team was able to comfortably secure a mortgage for me a few years ago. ...Read More

Mortgages For Contractors

The number of people in Britain working on fixed term contracts has risen significantly over the past decade. Many of these people are effectively self-employed and work for one or a few large clients on specialised project run on fixed term contracts. Others are part of the growing gig economy, with drivers for firms such as Uber and Deliveroo working on zero-hours contracts. Tech firms, accountancy firms and even professional services firms are also increasingly moving from full-time PAYE employment contracts to fixed term contract employment.

For those working in this way, there are multiple benefits – flexibility of working hours and location being the obvious ones. One downside however, is that it’s still harder to get a mortgage if you don’t have a full time job than it is if you do.

This is primarily down to rules that govern mortgage lenders brought in after the financial crisis. Long gone are the days when you could self-certify your income and the lender would hand over a mortgage. Now, lenders must see evidence of your income and expenditure before they decide if you can afford the mortgage repayments.

This is what presents a challenge to some contract workers, particularly if your income varies month to month. Lenders want to see a ‘guaranteed’ level of income each month to cover the mortgage payments and your other fixed expenses.

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What Our Customers Say

Customer - Purchase
Very helpful in finding a suitable mortgage for me as an expat. A minor criticism is that I could have done with a little more handholding in the middle as a first time buyer but other than that a great ...Read More
9 days ago

Customer - Buy to Let Remortgage
Very helpful team and appreciate all of their hard work in helping us sort our mortgage as soon as possible. ...Read More
14 days ago

Catherine Chambers - Buy to Let Remortgage
Highly efficient friendly and professional. It was an easy process and they kept us informed all along the way. They did not waste our time and found us just what we wanted. ...Read More
26 days ago

Stephen Hire - Buy to Let Remortgage
Fast and efficient service. Quickly established my needs and potential borrowing capability ...Read More
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How Much can Contractors Borrow on a Mortgage?

Different lenders have different rules about how they assess how much you can borrow against your contract earnings. They will look at the length of your contract, the number of contracts you have and your monthly income.

Don’t forget that as you will have to complete a self-assessment tax return, you will only have your net monthly income to cover expenses, so you’ll need to factor in your tax liability when working out what you can afford too.

They will want to see a track record for what you’ve earned and if it shows consistent levels of income, so much the better. Some lenders will ask for a little as six months bank statements, but most will want to see a minimum of one-year’s worth of signed off accounts, with some lenders requiring two or three years.

If you have a number of years working as a contractor, lenders are likely to take your average annual income into consideration when assessing your mortgage application. If your income has been volatile however, they may just look at the most recent year or they make restrict the amount you can borrow against to a percentage of your annual income.

Some lenders will look at your income if you charge clients a day-rate – though these mortgages are harder to come by.

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Limited Company

There are different rules again if you are set up as a limited company and your contract income comes into this rather than to you directly. Rather than assessing your income based on your full earning as they would outside of a limited company, lenders typically look at your salary and dividend income and calculate what you can afford on the mortgage based on this.

This can be challenging as tax accountants seek to minimise tax payable on income, sometimes by reducing the salary you take and maximising dividend income which, while taxed less, is more variable and not seen as so reliable by all lenders.

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Work closely with your adviser

There are still options however, it’s just important to work closely with your adviser to ensure you get the mortgage. Some lenders are more able than others to look at your business in the round and assess your ability to repay the mortgage on this rather than just straightforward salary income.

A mortgage adviser with experience working with lenders that specialise in helping contractors to buy their own home should be able to help you work out how much you can borrow and which lender will be right for you. Speak to an adviser now.

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Find Out Current Best Rates

Property Value
£
Mortgage Amount
£
Reason for Mortgage
Mortgage Type
LenderInitial RateTypeForThenAPR*ERC*Fee
Progressive BS 2 Year Discount No Fee Purchase BPG0.51%Discount2 years4.35%3.17%2 years £0
Progressive BS 2 Year Variable No Fee Purchase Foreign Currency Loan BPG0.79%Discount2 years4.35%3.26%2 years £0
Progressive BS 2 Year Fixed £995 Fee Purchase BPG0.89%Fixed2 years4.35%3.96%2 years £995
Barclays Bank 2 Year Tracker £999 Fee Purchase No ERC BWO1%Tracker2 years3.74%3.3% £999
Skipton BS 2 Year Tracker £995 Fee SBS1.02%Tracker2 years4.64%3.9% £995
Accord Intermediary 2 Year Discount £495 Fee Purchase Free Val ACC1.04%DiscountMar-20244.49%3.7%31-Mar-2024 £495
Nationwide BS RETENTION 2 Year Tracker £999 Fee Existing Borrowers BNW1.04%Tracker2 years3.74%3.4% £999
Nationwide BS 2 Year Tracker £999 Fee BNW1.04%Tracker2 years3.74%3.4% £999
Nationwide BS FTB 2 Year Tracker £999 Fee Cashback BNW1.09%Tracker2 years3.74%3.4% £999
Progressive BS 2 Year Discount No Fee Purchase Family Assist BPG1.09%Discount2 years4.35%3.36%2 years £0
Mortgage product availability is subject to status and availability. Although great care is taken to ensure that product details are as accurate as possible no liability can be accepted for errors or omissions.
*APR = Annual Percentage Rate *ERC = Early Repayment Charge
*These figures are only illustrative. An assessment of your needs will be confirmed before a recommendation can be made. A Key Facts Illustration, which is personal to your circumstances, will be provided if a recommendation for a mortgage product is made.

Best Discounted Rates

LenderRateType
Progressive BS 2 Year Discount No Fee Purchase BPG0.51%
then 4.35
(variable)
DiscountRead More
Progressive BS 2 Year Variable No Fee Purchase Foreign Currency Loan BPG0.79%
then 4.35
(variable)
DiscountRead More
Stafford Railway BS Direct 2 Year Discount £1000 Fee SRB0.85%
then 2.95
(variable)
DiscountRead More

Best 5 Year Fixed Rates

LenderRateType
Progressive BS 2 Year Fixed £995 Fee Purchase BPG0.89%
then 4.35
(variable)
FixedRead More
Barclays Bank 2 Year Fixed £999 Fee Purchase BWO1.11%
then 3.74
(variable)
FixedRead More
Progressive BS 2 Year Fixed No Fee Purchase BPG1.14%
then 4.35
(variable)
FixedRead More
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