1. Self employed contractor and sub-contractor mortgages
Anyone who is registered as self-employed with HM Revenue and Customs (HMRC) and pays their own tax and National Insurance contributions is classed as self-employed, whether they declare their income through self-assessment or have an accountant do it on their behalf. Self-employed contractors might be sub-contracting for one or a handful of companies.
Getting a mortgage as a self-employed contractor or sub-contractor in the UK might prove difficult if you have less than 12 months’ worth of working history, as most lenders need you to have been trading in this capacity for a year – some, however, may accept six months, and others might even consider you on day one of a new contract (offering a mortgage based on a multiple of your day rate), as long as it is for at least six months and you have history of working in this capacity.
Lenders who offer these mortgages usually assess the borrower based on the figures they declare as net profit (for sole traders and partnerships) or your salary plus dividends (for Ltd Companies).
Mortgages for recently self-employed contractors
We often hear the question “can contractors get a mortgage if they’ve just started trading this way?” and as we’ve already discussed, some providers may lend to you if you’ve been self-employed for less than a year. These deals usually call for specialist contractor friendly mortgage providers and are often based on day rate calculations and specific details of your contract when you started.
2. Mortgages for fixed/short term contractors
Generally speaking, those on fixed or short term deals might find it easier to get a mortgage as a contractor than others who trade this way. Applicants are required to have been trading for at least six months and have a further six months to run on their current contract.
The longer you have been trading for, the better in the eyes of the lender, and it will also help your cause if your contract has been renewed at least once. That way, the mortgage provider is more likely to view your earnings as a stable source of income.
What if my contract has never been renewed?
Getting a mortgage as a short or fixed term contractor whose deal has never been renewed is still possible, but the number of approachable lenders might be smaller, especially if you only have six months’ working history on record. Certain lenders might cap the loan to value ratio (LTV) to 80% under these circumstances, but it can be as high as 90% if your contract has been renewed at least once and you have a good six months or so remaining on your existing agreement.
3. Umbrella contractor mortgages
Whole-of-market advice from contractor mortgage specialists might need to be sought if you’re a contractor working through an umbrella company, as some lenders may struggle to grasp how sustainable your income is and turn you away outright. However, there are lenders who cater for this type of borrower, subject to certain criteria being met.
It will usually help if you’ve been trading in this capacity for at least 12 months and your contract with the umbrella company has been renewed at least once. If neither of those conditions apply, it’s still worth making an enquiry with us so the advisors we work with can outline all of your options.
4. Mortgages for zero hour contract employees
A specialist contractor mortgage broker may also be required if you’re on a zero hour contract, as many mainstream lenders consider these borrowers too high risk. The providers which do cater for them will typically ask for a track record of 12 months’ income as well as evidence that the work is likely to continue. It may, however, be possible to find a lender will to offer finance to zero hour contract workers with less than a year’s worth of income, with whole-of-market access.
5. Agency worker mortgages
We sometimes heard the question “can I get a contractor mortgage if I’m an agency worker?” and the answer is yes, subject to standard criteria. Since the Agency Workers Regulations (AWR) was introduced back in 2011, temporary agency workers have enjoyed some of the same rights as those in permanent employment, making them lower risk to mortgage lenders. With this in mind, some providers are happy to lend to agency workers (as long as they have at least 12 months experience working in the capacity) and the advisors we work with know who they are.