Contractor Mortgage

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Contractor Mortgage (Part 1)

Michal Iwinski talks to us about how the mortgage process works if you are a contractor. Episode one of two, recorded in February 2025.

Podcast approved by The Openwork Partnership on 14/03/2024

Can contractors get a mortgage? How long do you have to be a contractor to get a mortgage?

Generally speaking, yes, contractors can get a mortgage, but it may be more difficult than for full-time employees. To qualify, you need to demonstrate a consistent income and meet the lender’s affordability criteria.

What are the lending criteria for contractors? How will my income be assessed?

Lenders use various criteria to determine how much they are willing to lend contractors. They may look at your average income based on a number of years, or use your lowest yearly income for a certain period.

Your day rate can also prove useful to help lenders to determine how much you’re likely to earn. They will use this figure and multiply by the number of weeks you work each year, assuming that you take some holiday.

However, be prepared to show how many weeks you’ve worked in the most recent year, and be aware that they will take gaps between contractors into consideration. Generally, lenders want to see a consistent working pattern.

What documents do I need to get a mortgage as a contractor?

To get the best mortgage, lenders generally require at least six months’ evidence of earnings as a contractor.

However, if you have more than 12 months of history, you’re likely to have more options to choose from. Less than six months may be possible with some lenders, but your choice will be more limited.

The typical documents will include your most recent contract, and bank statements for the previous three to six months. We will need proof of income via pay slips or invoices.

As proof of identity, you could provide your passport or driving licence, and proof of address via a recent utility bill or council tax bill. Sometimes lenders will insist on seeing your CV to assess your contracting history.

Can I take out a mortgage as a contractor with another person?

Yes, you can take out a joint mortgage with another person to buy property as a contractor. This is actually a common option, as with another person it may be easier to get the mortgage.

Each lender will have their own way of assessing the other person’s income. They could be employed, self-employed, or be another contractor. Lenders will consider the other person’s employment type and credit history, and will also consider both of your incomes, outgoings and other commitments.

What deposit will I need as a contractor? Will I need a bigger mortgage deposit than usual as a contractor?

You won’t necessarily need a larger mortgage deposit as a contractor. In theory, you can get a contractor mortgage with a 5% to 10% deposit, like most other borrowers.

But the more money you can put down, the more likely you are to be offered deals with lower interest rates. This is a good opportunity to play to the strengths of being a contractor. For example, you can make an effort to save up as big a deposit as you can, using the higher wages you can command in contract work.

Building up a large cushion will offset the perceived drawbacks of being a contractor – and will mean the bank doesn’t have to lend so much. It also helps persuade them of your high earning power.

How much money can I borrow as a contractor?

The amount you can borrow as a contractor depends on your income, the size of your deposit and your personal circumstances. A lender will also consider your monthly income and outgoings.

There are also other factors to be considered. For example, higher earners may be able to borrow at higher multiples of five or even 5.5 times their annual income. It really depends on the lender, as they will price contractors differently.

A proven track record in your particular industry can also help overcome questions about stability. Details around any gaps in contract or employment will also help.

How do I get a mortgage if I contract under a limited company?

To get a mortgage as a contractor operating under a limited company, you need to demonstrate a stable income. You will need to provide your company accounts, personal bank statements and tax returns such as SA302s, highlighting your trading history and profit.

Most lenders will require you to have a solid track record of at least a year in business. They may ask for a personal guarantee, meaning you are personally liable for the mortgage debt.

It’s sometimes best to use a specialist lender that is familiar with contractor situations to find the best options for your circumstances.

What if I’m on a day rate?

Your mortgage affordability will be assessed based on your daily contract rate rather than traditional annual salary. This is common for contractors who are paid per day worked.

Essentially, lenders calculate your potential yearly income by multiplying your day rate by the number of working days you expect to have per year. This allows you to potentially borrow more than if they only consider your tax return, which might show lower income due to business expenses.

You usually need to approach a lender specialising in contractor mortgages for this. They understand how to assess your income based on your daily rates.

Can I get a Buy to Let mortgage as a contractor?

Yes, you can Buy to Let as a contractor, although it may be slightly more challenging than for someone with a standard employed income. This is because lenders require more proof of consistent income due to the fluctuating nature of contracting work.

However, with a good track record and sufficient savings, you can still qualify for a Buy to Let mortgage as a contractor.

Can I get a mortgage as a contractor with bad credit?

Yes, it is possible to get a contractor mortgage with bad credit. Again, it may be more challenging. The severity of your credit issues will affect your chances of getting the mortgage.

Have you got anything else you’d like to add before we return with part two?

Just in summary, it might be more challenging to get a mortgage as a contractor, taking into account everything we have just discussed. But this is what we are here for, to find the best solution based on your circumstances.

We work with numerous specialist lenders who will always consider you if mainstream lenders can’t. So, welcome to Aries Financial.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

MOST BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

Approved by The Openwork Partnership on 14/03/2024

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Contractor Mortgage (Part 2)

We continue the conversation on how the mortgage process works if you are a contractor with Michal Iwinski. Episode two of two, recorded in February 2025.

Podcast approved by The Openwork Partnership on 21/3/2025

Are there any government schemes for contractors?

There are a variety of deposit assistance schemes available to help homebuyers, including contractors who may not have the funds for large down payments.

Some of these programmes include grants, loans and part-rent/part-buy schemes that will help cover all or part of your down payment.

How does the mortgage process work if you’re a subcontractor?

If you are a subcontractor, the mortgage process is largely the same as a traditional employee, but you will need to provide more detailed proof of income, usually in the form of for your company accounts or tax returns like SA302s.

These are needed to demonstrate your earning stability, as lenders are more cautious with the fluctuating income that is typical with contract work. This might also involve providing bank statements, details of your day rate and total working days to accurately assess your affordability.

Can I get a mortgage as a contractor inside IR35?

Yes, you can still get a mortgage as a contractor inside IR35. Some mortgage lenders have explicitly conveyed their stance on IR35 and how they assess such applications.

Other banks and building societies are yet to incorporate these changes into their lending criteria. So unfortunately, a smaller number of mortgage providers accept contracts inside IR35, but it is certainly still possible.

Can I get a mortgage on a temporary contract?

Yes, you can get a mortgage on a temporary contract, but it may be more challenging. Lenders consider first and foremost how long you’ve been on a temporary contract and how long that contract lasts.

They will also look at whether your contract is likely to be renewed, the industry you work in, and whether you work for one employer or multiple companies.

Can I get a mortgage on a zero hours contract?

Yes, it is possible to get a mortgage on a zero hour contract, but it may again be more difficult. The best way to do that is to find a specialist lender that is open to non-standard employment contracts.

Bear in mind that you need to show consistent income. Lenders often review your average earnings over the past one or two years, and you will probably need to show evidence to suggest future employment stability.

Lenders will also want to know about any past or current credit issues. You may need to take action to improve your credit file if it is a barrier.

Can I get a joint mortgage as a contractor?

Yes. You can take out a joint mortgage with another person to buy property, and for a contractor is a common option – it can actually make it easier to get the mortgage.

Each lender will have their own way of assessing the other person’s income, whether they are employed, self-employed or another contractor. Lenders will consider their employment type and credit history, income, outgoings and other commitments.

How does the remortgaging process work as a contractor?

When remortgaging as a contractor, the process involves providing detailed evidence of your income stability through recent payslips, contract details and tax returns. Lenders will scrutinise your fluctuating income to ensure you can manage the new mortgage repayments.

This usually means needing a longer track record of consistent work. You may require a specialist mortgage broker to find a lender suitable for your situation.

What do I need to do to apply for a mortgage as a contractor?

To apply for a mortgage as a contractor, you need to demonstrate that your income is stable, that you have a good credit score and a deposit. The most important part is income, of course, and you will need to provide evidence of future contracts.

You should show that there are few gaps between contracts and that you’re earning what your contract states. In most cases, a specialist mortgage lender would be the best option to go for, but not always.

What steps can I take to strengthen my mortgage application as a contractor?

Key steps to strengthen your application are to improve your credit score, provide evidence of income and show that you have stable work.

To improve your credit score, you need to pay all your bills on time and avoid taking new credit before applying for the mortgage. To evidence your income, you should provide bank statements and invoices for recent earnings, and contracts for current and previous work.

You can show that you have stable work with your accounts for the last few years and proof of contracts for future work. Another step to increase your chances of getting a mortgage is to save up a bigger deposit, as that can help you get a better mortgage rate.

Of course, you should consider working with a specialist mortgage broker, as we can provide tailored advice and access exclusive deals. If you’d like to explore your options – not just for contractors, but any other unusual circumstances – just give us a call. We’ll help you as much as we can.