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Contractor Mortgages – How To Get One?

Being a contractor can offer you flexibility and independence, but also uncertainty – especially when buying a home. But as the number of freelancers and independent contractors in the UK climbs, don’t despair – many mortgage lenders could be willing to lend to you, even if your income jumps around.

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Contractor FAQs

How much can contractors borrow on a mortgage?

When you apply for a mortgage, the mortgage provider will first work out how much to lend you – known as an affordability assessment. It will look at how much you generally earn, what your expenses are and how secure your income is.

As a contractor, you will usually need to show evidence of your earnings history for at least the past six months. Due to this, applying for a mortgage early in your contractor career can be more difficult, though you may still have options.

How much can you borrow with a Contractor Mortgage?

Generally speaking as a contractor you will normally set up to work in one of 3 ways:

  1. Umbrella Contractor / Pay Roll Solution
  2. Limited Company Contractor
  3. Offshore Contractor

Although the working mechanisms may change, essentially all are based on the premise of flexible working on short term day rate or hourly rate contracts – and there are lenders which will consider all 3 mechanisms.

If you use a specialist broker and your application is submitted under contractor criteria then lenders may be willing to calculate your annual income on the basis of your day rate or hourly rate in your contract.

In this case, lenders will take your daily rate and multiply it by the number of days you generally work per week, then multiply that out to the full year.

Be aware that lenders will also want to factor in any holidays and gaps between contracts, so most will assume you only work 46 and 48 weeks per year.

What is a day rate example?

Day rate example:

If your day rate is £400 and you generally work four days per week, your estimated annual income would be around £76,800. £400 x 4 days = £1,600 per week £1,600 x 48 weeks = £76,800

This approach allows you to use all of your earnings including expenses to secure mortgage funding – in many circumstances this can mean you can borrow up to 3 times more using these lenders contractor criteria

How to strengthen your application for a Contractor Mortgage

1.Offering a larger deposit – and so borrowing a smaller amount – is one way to improve your chances of success. The less risk a bank takes in lending to you, the more favourably they will view your application.

2. Lenders will also look for signs of long-term security. If you can produce an ongoing agreement with an employer, or evidence of past agreements that are likely to be renewed, this may make your application more appealing to lenders.

3. While taking breaks between stints may be one of the perks of contracting, minimise time off in the lead-up to buying a home – lenders may be wary if they see you out of work for more than eight weeks in a 12 month period.

4. In addition, consider how good your credit score currently is and whether you need to work on improving it before submitting a mortgage application. This may be even more significant for contractors, as lenders will look for evidence of good financial management when your income is not guaranteed.

5. You’ll also need to show evidence of your expenses and operating costs – the more information you provide, the better the lender can understand your financial situation and feel confident lending to you.

Making an application for a Contractor Mortgage

A number of specialist lenders offer mortgage deals tailored to contractors, including some that cater to specific professions.   If you’re a contractor or freelancer, it can be valuable to speak to a mortgage broker. They can help you find a lender that accepts mortgages from people in your situation and help you navigate the application process.

An expert contractor broker such as Mint FS, understand how contractors work and how to present this the right way to lenders to maximise your borrowing.

When looking to submit an application on contractor criteria a broker should only initially require 3 things:

  1. A copy of your current contract and confirmation it is renewing if it has less than 3 months to run.
  2. A copy of your CV showing your experience and contracting history.
  3. A copy of the last 3 months personal bank statements and if working through a limited company solution, the corresponding business account statements also.

If your broker requests payslips or accounts then you should question how they are presenting your application.

Mint Specialist Services

Bridging Loans

A bridging loan or bridge loan is a short term loan given to ‘bridge the gap’ between you buying a new house and selling your previous house.

Secured Loans

Secured loans – also known as homeowner loans, home loans or second-charge mortgages – allow you to borrow money while using your home as ‘security’ (also called ‘collateral’). This means the lender can sell your property if you aren’t keeping up with repayments, as a way of getting their money back.

Expat Mortgage

An expatriate (often shortened to expat) is a person either temporarily or permanently residing in a country other than that of their citizenship

Portfolio Mortgages

There are now 2.5 million landlords in the UK and successful investors have been able to establish a Buy to Let portfolio of a number of properties. But changes by the Prudential Regulation Authority have introduced new checks for Buy to Let portfolio mortgages.

Offset Mortgages

The idea behind an offset mortgage is simple and straightforward. By linking your mortgage and your savings, you can bring down the cost of your loan. This is because rather than earning interest, your savings reduce the amount of interest you pay on your mortgage.

Self Employed Mortgages

ne of the misconceptions about the mortgage market is that it is now very difficult for self employed people to get a self employed mortgage loan in order to buy a home. It’s certainly true that one type of mortgage used by the self employed in the past (self certification mortgage) is no longer available – but for many self-employed people, their chances of being able to borrow are still just as good as anyone else’s.

Contractor Mortgages

Being a contractor can offer you flexibility and independence, but also uncertainty – especially when buying a home. But as the number of freelancers and independent contractors in the UK climbs, don’t despair – many mortgage lenders could be willing to lend to you, even if your income jumps around.

Self Build Mortgages

Building your own home is not for the faint hearted. And on top of everything else, you’ll need to take out a special self build mortgage to finance it. We can walk you through the self-build process step-by-step, from finding land to hiring professionals to help you.

Private Bank Mortgages

Many borrowers needing a larger loan are unaware of the bespoke offerings that private banks have. With a product specifically tailored for you and your income, you may be surprised what our relationships in this area can achieve.

Commercial Mortgages

Are you looking to expand your business? Have you realised that the cost of renting has become too great? If so, you might find that a commercial mortgage can offer business finance options you weren’t aware of. Here’s everything you need to know.

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The legal bit...

Mint FS Limited, trading as “Mint Financial Services” or “Mint FS” is an appointed representative of HL Partnership Limited, which is authorised and regulated by the Financial Conduct Authority. Mint FS Limited is registered in England and Wales with company number 11993128. Registered Office: Unit 6 The Centurion Centre, Castlegate Business Park, Salisbury, Wiltshire, SP4 6QX. The information contained in this website is subject to UK regulatory regime and is therefore intended for consumers based in the UK. Calls may be recorded for training and security purposes and to improve the quality of our services. Mint FS Limited have no control over and are not responsible for the content of other sites. Your home may be repossessed if you do not keep up mortgage payments on it. A fee is payable at outset. We charge a minimum of £395 up to a maximum of 1.5% of the loan amount.