Contractor Mortgages

Contractor Mortgages

With the rise of freelancing and flexible working, contractor mortgages have become increasingly common. Many lenders now offer specific products for contractors, whether you’re working through a limited company, an umbrella company, or on a fixed-term contract.

Contractor mortgages can be suitable for a range of mortgage types, including options for first time buyers and buy to let investors.

If you’re wondering “Can I get a mortgage as a contractor?” the answer is yes. But the process can be more complex than for a full-time employee. Some lenders offer contractor-specific products for both first time buyers and those seeking buy to let properties.

In this guide, we’ll explore what a contractor mortgage is, the requirements, how much you can borrow, and which lenders are most contractor friendly.

What is a Contractor Mortgage?

A contractor mortgage is a home loan designed for individuals who earn income through contract-based work rather than permanent employment. This includes:

• Fixed-term contractors

• Freelancers

• Self-employed professionals working via limited companies

• Umbrella company workers

• Day-rate contractors (e.g. in IT, engineering, healthcare)
  Contractor specialist brokers can help identify lenders who assess applications based on your contract details.

Unlike traditional mortgages based on salary payslips, contractor mortgages assess income through contract values, invoices, or annual accounts, depending on your trading style. Some lenders offer mortgage based approvals, where eligibility is determined based on your contract rather than traditional payslips, allowing you to secure a mortgage based on your contract rate alone.

Can I Get a Mortgage as a Contractor?

Yes, many lenders now cater to contractors. However, the criteria vary depending on how you’re set up (limited company, umbrella, sole trader, etc.) and your contract type. Most lenders have stricter lending criteria for contractors compared to permanent employees.

Lenders typically want to see:

• A minimum 12-month history of contract work (some accept less)

• A current contract with 3–6 months remaining (or history of renewals)

• Evidence of working in the same industry or role consistently

• Track record of income being paid into your account

Many contractors work on multiple contracts at once, and some lenders are open to this common scenario.

Proof of Income Requirements

The documentation needed depends on your setup:

Limited Company Contractors

• 1–3 years of company accounts

• SA302s and Tax Year Overviews

• Current contract value

• Evidence of regular income or dividend payments

Umbrella Company Workers

• Payslips (usually last 3–6 months)

• Remittance slips from the umbrella company

• Bank statements

• Copy of current contract

Day Rate Contractors

Some lenders will calculate income using:

Day rate x number of working days per week x 46-48 weeks

For example: £400/day x 5 days x 48 weeks = £96,000 annualised income

Understanding how the mortgage application process works for contractors is crucial, as senior underwriters often review complex contractor cases to ensure all documentation is accurate and lending criteria are met.

How Much Can a Contractor Borrow?

Contractors can usually borrow 4 to 5.5 times their verified annual income. Some contractors may be eligible for a higher loan amount compared to permanent employees, depending on their contract and income structure. The exact figure depends on:

• Credit score

• Credit rating

• Contract history

• Income stability

• Existing financial commitments

• Deposit size

Example: If your income is £90,000, you may borrow up to £405,000 (at 4.5x). This would be before lenders take into consideration any outgoings and commitments. The size of the mortgage loan available to you will also depend on these factors.

Contractor Mortgage Deposit Requirements

Deposit requirements are generally the same as for permanent workers:

• Standard: 10% deposit

• Better rates: 15–25%

• Poor credit: 20–30% may be required

A larger deposit improves your loan-to-value (LTV) and access to better rates. With a bigger deposit, you are more likely to access market rates and the same rates as other borrowers, increasing your chances of securing a favourable mortgage deal.

Pros and Cons of Contractor Mortgages

Pros:

• Income can be assessed via contract value (ideal for high earners)

• Lenders increasingly flexible with contractor types

• Can access high street and specialist products

• More competitive than ever due to demand

• Contractors can access a range of mortgage products, including interest only, offset mortgages, fixed rate, and variable rate mortgages.

Cons:

• Not all lenders accept contractor income

• May need help from a broker to find the right match

• Inconsistent income or contract gaps may reduce borrowing power

• Stricter underwriting for bad credit or limited work history

• Stricter lending criteria since the credit crunch have made interest only mortgage options less widely available.

Fixed rate mortgages offer a consistent interest rate and predictable monthly repayments for a set mortgage term, providing payment security. In contrast, variable rate mortgages have interest rates that can fluctuate with the market, so monthly repayments and the total interest charged may change over time. Understanding your mortgage term and how interest rates affect the interest charged is crucial when choosing between these options.

After successful application and underwriting, you will receive a formal mortgage offer from the lender.

Choosing a Mortgage Broker

Securing a mortgage as a contractor can be more complex than for permanent employees, which is why choosing the right mortgage broker is essential. A specialist mortgage broker who understands the unique income structure and payment patterns of contractors can make all the difference in finding the best deal for your circumstances.

A good mortgage broker will have in-depth knowledge of the contractor mortgage market and established relationships with contractor friendly mortgage lenders. They know which lenders offer the most flexible lending criteria, how to present your contract income in the best light, and which mortgage products are most suitable for independent professionals and self employed people.

When selecting a mortgage broker, consider the following:

• Specialist Experience: Look for a broker who regularly arranges mortgages for contractors, freelancers, and limited company contractors. Their expertise can help you avoid common pitfalls and speed up the mortgage application process.

• Whole-of-Market Access: A broker with access to the entire mortgage market can compare a wide range of mortgage deals, ensuring you get the best contractor mortgage for your needs.

• Understanding of Contract Based Underwriting: The best brokers know how to present your annualised contract rate, current contract, and previous contracts to meet lender requirements.

• Proven Track Record: Ask for testimonials or case studies from other contractors who have successfully secured a mortgage through the broker.

• Clear Communication: Your broker should explain each step of the mortgage application process, keep you up to date, and provide honest mortgage advice tailored to your personal circumstances.

Working with a specialist mortgage broker not only increases your chances of securing a mortgage but also helps you access exclusive mortgage products and the best deals available. With the right support, you can confidently navigate the mortgage market and take your next step onto the property ladder.

Which Lenders Offer Contractor Mortgages?

High Street Lenders (Contractor-Friendly):

Specialist Lenders (Flexible Criteria)

Note: Some lenders have specialist underwriting teams who understand the complexities of self employment and contractor income, which can improve your chances of approval.

Contractor Mortgage with Bad Credit Is It Possible?

Yes, several specialist lenders will consider applicants with:

• CCJs (over 12 months old)

• Defaults or late payments

• Low credit scores

• Debt management plans (case by case)

The credit crunch led to stricter lending criteria, but specialist brokers can still help contractors with complex circumstances secure mortgages by accessing contractor friendly lenders and specialist underwriting teams.

You’ll likely need:

• At least 15–30% deposit

• Strong proof of income

• Clean conduct in recent months

Tips to Improve Contractor Mortgage Success

• Work with a whole-of-market broker

• Prepare your documents in advance (contracts, accounts, bank statements)

• Keep gaps between contracts to a minimum

• Avoid large credit commitments before applying

• Save for a larger deposit to improve loan terms

• Work with a contractor mortgage broker or contractor specialist broker to guide you through the entire process, from mortgage applications to receiving a mortgage offer.

Getting a mortgage as a contractor is absolutely possible especially with the right lender and the right preparation. Whether you’re a day-rate IT contractor, a freelance consultant, or working via an umbrella company, there are mortgage products out there tailored to your circumstances.

A specialist mortgage broker can give you access to the full market and ensure your income is presented in the best light to a lender.

Get help from an experienced mortgage broker.

You can speak to one of our specialist mortgage brokers who would be able to guide you through the process. They will advise if there is a lender available and the maximum loan amount based on your circumstances. We are a whole of market mortgage brokerage with access to all lenders. Call us on 01332 470400 or complete the form with your details for us to give you a call back.

Specialist brokers can help with both residential and buy to let mortgages, ensuring you get the best mortgage deal and mortgage loan for your needs.

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