The mortgage market is constantly evolving, with criteria for lending, internal policies, interest rates and terms all subject to change according to shifting trends in demand. Mortgages for contractors are products designed to meet your specific needs as a contractor, most especially the nuances around your pay.

When a contractor’s pay is usually based on a daily or weekly rate – with places of employment sometimes varying from month to month – you are probably not able to give a figure for an annual salary, or provide the two or three years’ worth of accounts that typical mortgage providers like to see when assessing your application for a mortgage.

To address this, specialist mortgages for contractors have been set up so that you can borrow money based purely on your contract rate. When making their affordability assessment during the application process, those lenders that are used to dealing with contractors will give far more weight to your current status and ongoing agreements than your past history. If you also have a clean credit record and fall into the low-risk category, then you should be able to borrow at the same rate of interest as a conventionally salaried employee.

Do I need 3 years of accounts to get a contractor mortgage?

You’ll be pleased to know that times have changed and many lenders are more flexible than they once were. While in the past it might have been a strict requirement across the board for a self-employed contractor to supply three years’ worth of accounts, there are now a number of lenders who are prepared to offer a mortgage to a contractor based on figures from a shorter time period, or on confirmed up-to-date contracts, if this can be shown to be a reliable indicator of income.

To get a mortgage without producing 3 years of accounts, it’s likely you’ll need experienced professional advice from a broker who thoroughly understands the market and the various conditions exercised by lenders from every corner of the mortgage landscape – from the high street banks to the niche-market specialists. While it’s true that every lender has their own criteria that dictates who they will lend to and what they need to see, most specialist lenders will be happy to arrange a mortgage based on the contract you have now, rather than past performance.

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It’s not like anyone can walk into a lender’s office and request a contractor mortgage. There will be some criteria to fulfil, and on a basic level you’ll find that these kinds of mortgages are typically designed for people in two types of circumstances:

• Anyone who is employed on a fixed-term or short-term contract basis – these could be outside consultants, people standing in for other workers away on leave, event technicians or other transitional positions where a company or people will need external help for a specified period of time.

• People who are self-employed but working through one company – these are usually tradespeople or industry specialists (for example, IT engineers, electricians, carpenters, plumbers, etc) – although in more recent times, their self-employed status may be brought into question for tax purposes under the IR35 legislation, depending on the level of supervision and control over their workplace.

Can I get a Contractor Mortgage?

If you recognise yourself in either of the above categories, then you should be able to apply for a contractor mortgage. However, it is worth remembering that not all lenders are the same, with most taking different positions over who they lend to and what criteria they will use to judge applications, depending on the type of contract you have.

If you are at the beginning of a new contract, it may be possible to satisfy a mortgage lender of your verifiable income if you were working in the same industry previously, and have a track record of experience and consistent levels of fees.

Whatever your situation, it is very important to talk over your application with a specialist broker who will be able to fully explore the options and make recommendations to you based on your unique circumstances. Your application will stand a far greater chance of success, and you are far more likely to end up with the most suitable mortgage deals to meet your needs.

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• Agency workers – Usually a track record of 12 months working history is needed.
• Self-employed – Typically a 6 month minimum contract needs to be in place.
• Fixed term contracts – Previous experience as a contractor is usually needed
• Working under an “umbrella company” – Usually 12 months working history is needed.
• Zero hours contracts – It is usual for lenders to expect evidence of a 12 month track record. However, depending on individual circumstances and an overview of the whole lending proposition, it may be possible to use this type of income when it can be proved for less than a year.

A full assessment of your circumstances and requirements can easily be carried out by one of our expert advisers in order to establish which lenders will be happy to consider your application.

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Getting a mortgage as a contractor may be more difficult and time consuming than it would be as a ‘regular employee’, but don’t let this put you off. Given the right advice and guidance, your application should stand just the same chance of success as one from someone in a conventional salaried situation, and the documentation that you will need to provide will not be particularly onerous – it is simply a case of verifying your consistent income and showing that it is fair to expect it to be sustainable over an extended period of time.

In order to give your application the best chance of success, it will be important to be clear on the type of contract you have with any regular employers, the length of the term remaining on the contract(s) and your past experience – how long you have been in your field of work, the rates of pay you have been able to command consistently and the regular work you can expect – in order to gauge a suitable solution.

Our experience has shown us that everybody’s situation is different. You could be at any stage of your journey in property ownership and your freelance career, with different commitments, all kinds of properties and varying demands according to your types of work. Our specialist advisers will be able to review all your circumstances and requirements in order to match you with the right kinds of lenders and products, and recommend the most beneficial way forward.

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We have helped many people who have just started contracting to get the mortgage they need, at a reasonable rate. Much will depend on the type of work you carry out, with some trades known to be consistently in demand, for example, IT specialists, digital engineers, electricians, plumbers, retail outfitters, and so on. By demonstrating that your field of expertise can generate income consistently, you may be able to get a mortgage without a particular track record, although the majority of lenders do expect to see at least six months of regular employment to prove that you are established.

This said, the more evidence of long-term sustainability, and the demand for your skills, the better. It may be necessary to show a history of employment in a similar (if not the same) line of work to support your case that you can command certain levels of pay over an extended period of time, and that employers need your services.

The best thing to do is to discuss your situation with us. Once we have an overview of your current situation and previous history, we will be able to let you know if it will be possible for you to get a mortgage in your current circumstances, or if you need to build up more of a history of trading in order for lenders to make a decision in your favour.

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You might think that being only on a short-term contract would jeopardise your chances of getting a mortgage, but this does not necessarily prevent you from getting the mortgage you need. Specialist lenders are used to looking at applications from all sorts of potential borrowers, and you should still be able to obtain a mortgage even though you are on a short-term contract.  Much will depend on the nature of your work, and if you expect to be able to easily line jobs up continuously and move from one contract to the next (however short), or undertake sufficient contracts over the course of a year.

Lenders usually make decisions based on a view of your proven income in order to get an indicative figure for what it will be annually, and will normally look for evidence of a track record of earnings. If you can show a steady history of earnings and employment, with a discernable pattern of predictable income generated by your work, then this will count in your favour.

As is the case with any self-employed potential borrower, a mortgage lender will be looking to see that your income is sustainable, and the onus will be on you to show that you will be in a reliable situation work-wise based on past contracts, future prospects and projections. Fortunately, we will be able to guide you through the application process, help you to frame your income to show it in the most favourable light and give you the best chance of obtaining the mortgage you need.

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There is no specific requirement for a minimum deposit. A 5% deposit may be sufficient. As with any other type of mortgage, the amount of deposit will directly reflect in the interest rates available. A larger deposit will normally produce a lower rate of interest and repayments. However, this will be dependent on your income being adequate to support a mortgage for the balance of the purchase price.

Our specialist advisers will be able to review your circumstances and requirements in order to recommend the best way forward.

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As a contractor on a daily rate, a typical calculation is to multiply your current contract day rate by the number of days worked each week. This is then multiplied by 48 weeks to give an indicative annual income figure to be used for a mortgage calculation. Different lenders may use a different number of weeks to calculate the overall income but once the figure is established, potentially this may be multiplied 5 times to find out a maximum borrowing figure.

For example, a contractor day rate of £500 x 48 weeks could produce a maximum borrowing amount of £600,000.

It is vital that your individual circumstances and requirements are matched to a suitable lender and a discussion with one of our experts will save time.

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Being a contractor does not preclude you from getting a mortgage using the government’s Right to Buy scheme – your employment status is not a part of the criteria by which this is judged. You should be able to access the same terms as any other kind of applicant, provided you meet the general rules under Right to Buy, that is, to have been a public sector tenant for the last three years, at least.

It’s worth bearing in mind, though, that not every lender will consider this type of application, and while the council discount will go a long way to making the terms of your mortgage a little easier, you are likely to be expected to supply a personal deposit in addition to this, usually the industry standard minimum of 5%.

As with almost all kinds of mortgages, the lender’s decision on whether to grant you a loan will be based on an assessment of your income. Provided you meet the lender’s criteria regarding your income source, its reliability, projected consistency and ability to meet repayments as well as your other household budgets, there is no reason why your Right to Buy purchase should not go forward.

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A Buy-to-Let mortgage is different to a conventional mortgage, in that the amount you are able to borrow is usually based on the rentable value of the property rather than your income as a contractor. With the property being a service to a paying customer (your tenant) and the source of income, these types of mortgages can be seen as a kind of business in themselves. This being the case, the terms of your employment contract might not be as important as if you were applying for a residential mortgage, but you should know that some lenders may require a minimum term of your contract to be remaining.

This said, the Buy-to-Let loan will be dependent on your income (from the property, with perhaps your personal anticipated being borne in mind as a safety net) being adequate to support the borrowing. As with all Buy-to-Lets, you will also need to supply a larger than average deposit, usually around 25%. A property commanding an attractive level of rental income might make your personal income a non-issue. We have access to some specific in-depth calculators to get a clear idea of where you will stand regarding affordability.

A discussion with one of our Buy-to-Let or contractor specialist advisors will quickly establish the mortgage options available to you. Let a member of our team review your circumstances and requirements in a free, no-obligation consultation in order to recommend the best way forward for you as a contractor looking to get into a Buy-to-Let investment.

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The Government Help to Buy scheme is available to contractors and will assist by providing a low interest loan from the Government in order to increase the size of the deposit. This will result in a more attractive mortgage interest rate.

We can discuss the pro’s and cons of buying under this scheme so that you can proceed with confidence.

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Obtaining a mortgage on a property on a shared ownership basis, combined with your self-employment as a contractor, will indeed present a few more challenges than if you were applying for a mortgage under either of these scenarios individually. However, in our broad experience as specialist mortgage advisors and brokers, we have helped several people in these positions and others to successfully get a mortgage, so we know it is definitely possible.

As shared ownership mortgages may not be widely available, finding the right one to meet your circumstances requires a lot more research than usual. The good news is that we have an in-depth knowledge of the market, and an intimate understanding of the range of deals offered by specialist lenders, as well as all the criteria they use to judge applicants, so we are confident that we will be able to source the right mortgage to meet your needs.

Please have a chat with one of our specialist brokers, they will be able to make a thorough appraisal of your circumstances and recommend the best way forward to obtain a shared ownership mortgage that will suit your needs as a contractor. This is the kind of application that will require delicate handling and expert advice, and we’ll want to make sure you avoid any pitfalls that lenders might put in your way.

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If you are a contractor with bad credit issues, then you might find it more difficult than usual to get a mortgage, but it is definitely still possible. As a contractor or specialist self-employed worker, you will have had to take full responsibility for your finances, showing a level of oversight and control that should stand you in good stead with lenders when you make a mortgage application, even if you have bad credit marks showing on your records. If your verifiable income is shown to be sufficient to support the mortgage repayments then or if they are the kind of lender who takes an understanding view of a less-than-perfect credit history, then you should pass the lender’s affordability assessment and be on your way to a mortgage.

We’ll have to discuss your exact details fully in order to establish what options could be open to you. The approach that a lender takes will depend on the frequency, nature and severity of the adverse credit event(s), and indeed how long it has been since they happened. A few missed payments on a store card three or more years ago will have far less effect than a County Court Judgment registered against your name within the last year. But remember: all bad credit items will fall off your credit record after six years.

From experience, we know that every case is different. A specialist mortgage advisor is able to go over your personal circumstances with a professional eye to spot the strengths and weaknesses in your case, what you can do to make your application most favourable, and tell you what your best options are going forward as a contractor with a bad credit history.

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In your search for a lender that is willing to handle mortgage applications from contractors, and who has a range of contractor mortgage products geared to your needs, you will find that a number of lenders are more ‘contractor-friendly’ than others. Despite some likely difficulties with many mainstream providers, the good news is that there are indeed several lenders in the market that are happy to consider applications from self-employed contractors.

Much will depend on your individual contract type, as well as your overall financial circumstances. As ever with most mortgage applications, your access to lending will depend on the reliability of your income and the lender’s approach to assessing your creditworthiness and the affordability of repayments. Similarly, to contractors, all lenders have their own nuances and ways of doing things. The question you should ask when considering lenders is not, ‘who is the best lender for contractors?’ but, ‘which is the most suitable lender for me and my situation?’

This can be quite a complex area, with new products, deals and policies coming into play almost on a weekly basis. A free, no-obligation discussion with one of our self-employed/contractor specialist advisors will quickly establish which options will be available to you, and help you to take the first step in the right direction. We understand how contractors get paid, and what exactly a lender will need to see from you in order to grant you a mortgage.

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If you are undertaking contracted work through an agency, then you will need to provide extra documents in addition to your regular payslips and end of year tax calculation. This will usually be a copy of your current contract and also as much evidence as you can of your track record in the same line of work, to show continuity of income, expected levels of pay, and the demand for your skills, i.e. you will not be out of work any time soon.

While many lenders have adopted a more flexible approach to agency contract workers, not all of them will be willing to lend on this basis. Most will ask to see at least 12 months of consistent employment history, making it a challenge for agency workers or temporary contractors to get a mortgage through conventional channels. Most mainstream high street banks are particularly risk-averse, so you will likely need to deal with one of the several specialist mortgage lenders on the market who are willing to handle mortgages for agency workers.

In these circumstances, it is important for you to speak to a specialist broker in order to make sure that your mortgage application is structured to show your income in the best light, and placed with a suitable lender. Specialist lenders usually won’t deal with borrowers directly, only taking applications via a trusted broker. The application process could take a little more time and effort, but with the correct guidance and packaging, you should be able to enjoy a positive result.

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You won’t find a ‘best buy’ list of mortgage rates applicable to contractors available online via comparison sites, and with interest rates fluctuating on a daily basis, it would be impossible for us to provide exact guidance on the subject here. The truth of the matter is that you should never judge a mortgage product on its headline interest rate alone, as there are so many other variables that might make it not the most financially favourable to you over the course of the loan. The ‘best’ mortgage rate that you will find will be the one associated with the mortgage that is most suitable to your circumstances.

To put your mind at rest, we can say that the interest you’ll pay on a mortgage for a contractor should be very similar to the deal offered to a PAYE employee in the same circumstances. We often see that a contractor doing the same job as a conventional employee, but on a contract basis, is able to command a more healthy daily rate of pay, which allows them to save up a larger deposit than a normal employee. Invariably, a substantial deposit will enable access to a lower interest rate, therefore reducing the cost of the loan overall.

You’ll be pleased to know that there are also no limitations on the type of mortgage contractors can apply for. You should be able to consider a range of products with fixed, variable and tracker rates, according to what you want or need your mortgage to do for you, and how you want to approach it in the long term.

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You could spend an enormous amount of time and mental energy going through all the lenders available online or on the high street, trying to compare all their interest rates and introductory deals as well as their policies for applications and assessments. However, you might never really see the whole picture. The vast majority of specialist lenders do not advertise their deals to the public, preferring to only work through professional brokers and advisors.

While this might sound a little cloak-and-dagger, it’s actually for practical reasons. This will ensure that the borrower has already been vetted and gone through an advisory process to determine their financial status, how their income can be verified, and to make them aware of their options. It also makes sure they are the right kind of client for the lender, and the lender’s products will be a good match for the borrower.

A contractor mortgage broker specialises in helping self-employed people and specialist industry contractors find the most suitable mortgage to meet their needs. Their job is to act in your interests. Choosing the correct mortgage lender is not easy and requires a detailed analysis of your situation and objective, as well as an in-depth knowledge of the mortgage market. Our team of experts is on hand to assist and advise you on all aspects of self-employed mortgage arrangements. Feel free to get in touch for a free no-obligation chat.

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