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Mortgages available where your day rate is used for income calculation
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Mortgages for IT contactors, engineers & healthcare professionals

Contractor Mortgages

If you have your heart set on a property, you are earning more than enough to repay the mortgage and you have a sizeable deposit to put down, you probably think you'd make an ideal borrower, wouldn't you? Unfortunately not if you happen to be employed on a fixed term contract.

Mortgage lenders tend to be more cautious in their approach to contractors. Most take the position that as a contractor, earnings are volatile. Those who are paid by the day or by the job often earn considerably more than their traditional PAYE employed counterparts, however contracting does not provide the long term stability lenders desire. Contractors who operate through a limited company tend to earn their money through dividends or may have lump sums at the beginning or end of contracts. Ultimately, mortgage lenders tend to prefer regular payslips as proof of income rather than invoices.

How we'll help you get the most suitable for your circumstances

The good news is there are some lenders with a more flexible approach who have an appetite for providing contractor mortgages. Your most effective route to getting a mortgage is by applying through a mortgage broker. As professional mortgage advisors with extensive experience and fully understand the nature of contracting. We have direct relationships with all the contractor friendly mortgage lenders. When you first approach us we will consider your situation and requirements and we'll advise you of your options. When a decision is taken to make an application, we will assist you in putting together all the necessary documentation including details of your current contract and recent bank statements in order to prove your income. This information is then passed directly to the mortgage lender's underwriters who will make a decision based on the information provided and your credit history.

Contact us today for a free initial advice.

Determining how much you can borrow

The amount you can borrow is based on a multiple of your annual income. The rate of annual salary is used for people in full time employment, whereas for contractors, certain contractor friendly lenders will convert a contract day rate into an annual equivalent.

To calculate a crude estimate of what you might be able to borrow, multiply your contract day rate by 5 (days in a working week) and multiply that figure again by 48 (working weeks per year) and finally multiply this figure by 4.5 (income multiple). For instance, a daily rate of £350 would equate to annualised earnings of £84,000 with a potential mortgage of £378,000.

In order to qualify for contractor mortgages you will need to be operating through your own limited company or a UK payroll umbrella company. If you happen to use an offshore scheme, a mortgage lender will only take into consideration your UK taxable earnings as a measure of affordability.

Rise in people employed on fixed term contracts

There has been a shift in the way people work over the past few years with many traditionally employed people switching to contracting. Redundancies and pay freezes have pushed more employees to branch out on their own as contractors or entrepreneurs. While contractors have always been common in the IT industry, more investment bankers, accountants, healthcare professionals, office administrators, engineers, supply teachers, lawyers, journalists and media staff are now employed this way.

Restrictions beginning to ease

As contract workers are becoming more prevalent, there are signs the mortgage market is beginning to adjust. Lenders have been slow on the uptake, but they are starting to appreciate that individuals employed on a contract are not necessarily any more risky than those in full time employment. There has been a modest increase in the number of specialist and high street lenders who have relaxed their position with regard to less conventional employment status, however the product choice is still limited.

The key is getting the right advice and approaching lenders who are more likely to welcome you as a potential borrower. Contact us today for expert advice.