Contractor Mortgages Made Simple

Straightforward mortgage advice from expert brokers. Finding the perfect mortgage just for you without the jargon. 

1 Step 1

Straightforward mortgage advice from expert brokers. Finding the perfect mortgage just for you without the jargon. 

What's On This Page?

Get In Touch
1 Step 1
Contractor Mortgages Made Simple, Vantage Mortgages

Contractor Mortgage

Adam Messer explains mortgages for contractors – how they work and what to consider.

Can contractors get a mortgage?

Absolutely, contractors can get mortgages. There are a few ways to look at contract mortgages. All lenders will look at self-employed income, because contractors are self-employed and pay their own tax.

But most contractors will benefit from lender-specific contractor criteria, where lenders use your day rate based on the days per week your contract is for, across a year. Some lenders allow a few weeks to allow for holidays.

Using your day rate is always going to give you a higher income than your salary and dividends.

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

Some lenders will accept you as long as you’ve got a six month contract – you might be three months in and only have three months left, and that’s fine. Other lenders want you to have been contracting for 12 months and have six months left – and there’s lots in between.

All lenders have their own criteria for contractors and some are much better than others.
With the lender I just mentioned for a six month contract, you’re probably going to pay a slightly higher rate. But it’s doable. Sometimes you just have to pay a bit more if you need certain criteria.

What are the lending criteria for contractors?

Lending criteria is about making sure that you’ve got some experience as a contractor, as well. You can’t necessarily go from employed today to starting a three-month contract and expect lenders to use that income.

If it’s a long contract, however, that could be an option. Lenders are basically making sure that you know what you’re doing. We get a lot of IT contractors or automotive professionals that have been employed and then doing the same thing as a contractor instead.

If a lender can see that you know what you’re doing you stand a better chance.

How will my income be assessed?

Income can be assessed on your day rate, your hourly rate or weekly rate – whatever is on your contract. That’s how the lender will look at it.

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

We’re going to need the current contract, first and foremost. Depending on when it started or how long it’s got left, we might need the renewal. Let’s say you’re just about to come to the end of your contract but you have another one lined up, we’ll need that next one.

If you’ve only just started, we might want the previous contract as well. Some people get a renewal every three months, in which case those renewals will help.

A lot of lenders will want to see your business bank statements to show that the money you’re invoicing is actually coming in. Most contractors will invoice periodically, either weekly or monthly. That money will then be paid into your bank account. The lender would like to see that alongside the actual contract. Everyone also needs ID and personal bank statements.

Can I take out a contractor mortgage with another person?

Absolutely. It doesn’t matter if that other person is a contractor. If they are, the same criteria applies. If they’re just employed or self-employed, then whatever other criteria they fit into will apply. It’s very common for a contractor to take a joint mortgage with another person.

Loosely linked to this, most contractors have a limited company, and you might put your partner on your company for tax purposes. Let’s say you’re a contractor earning £100,000 a year, but your partner doesn’t earn anything. You can put your partner in your limited company and share your tax liability.

That’s going to be fine for a lender as well. It doesn’t really matter as long as you’re both on the mortgage.

You might be a contractor in a limited company with a third party – perhaps a friend in a similar job. This would be more specialist, as the people named on the limited company or on the contract aren’t the same people applying for the mortgage. In that case we may have to look at you as self-employed, depending on the lender.

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

No. The same rules apply for everyone. There are lenders that will accept a 5% deposit these days. The more deposit you’ve got, the better, but just because you’re a contractor it doesn’t necessarily mean that you need a bigger deposit.

How much money can I borrow as a contractor?

The affordability rules are the same as for anyone else. They will give you a certain multiple of your income, and factor in loans and credit cards and other debts. That doesn’t change whatever you do.

It’s the income they’re going to use for that calculation that’s different for a contractor. Using your day rate can often give you a much bigger mortgage amount. Let’s say your day rate means that you earn £100,000 a year, for example, but you only take out £50,000 from the business because that’s all you need currently. Some lenders will look at that additional £50K as a company director share of net profits.

Generally for contractor income, lenders will use that full value of your contract rather than just what you’ve taken. So a contractor can get a lot more borrowing using their contract income as opposed to their self-employed income.

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

Most people contract under a limited company, so the same rules apply. If you go through an umbrella company as a contractor, that’s fine too. The umbrella company acts like a middleman between you and the client company you’re contracting for.

It doesn’t really matter how you’re set up as a contractor. We can find the most suitable product for you.

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

Yes, absolutely. There are lots of options for Buy to Let as the lenders are much less fussy about your income.

With some lenders it doesn’t matter what income you’ve got, you can get a Buy to Let mortgage as long as you’ve got the deposit.

Buy to Let mortgages are trickier and less appealing at the moment in November 2023 – but that’s conversation for another day. You can definitely get a Buy to Let mortgage as a contractor.

Speak To an Expert
Our highly knowledgable advisers are ready to help and answer any questions you may have around your first time buyers mortgage.

Can I get a contractor mortgage with bad credit?

Potentially – it depends how bad the credit is. Some lenders are more tolerant of credit blips. The worse your credit is, the more specialist the lender might need to be, and the higher the rate is going to be.

Generally, whether you’re a contractor or not, you can usually get a mortgage, but it might cost you more than if you had clean credit.

Can I use Help to Buy or any other first time buyer assistance schemes?

As of now, in November 2023, Help to Buy has ended and there isn’t really anything to replace it. The best thing you can do now is get a lifetime ISA – but it doesn’t matter whether you’re a contractor or not for that.

How does it work if you’re a subcontractor?

We do quite a lot of mortgages for subcontractors, generally in the construction industry. If you are one of those, you’ll be familiar with the CIS: Construction Industry Scheme.

It’s where you get paid by a master firm each week or each month that deducts 20% tax. At the end of the year you’ll do your own tax return and factor in any other costs such as travel and materials. Generally you’ll get a bit of a tax rebate as a result.

That’s all fine too. There are lenders that will look at the gross amount you’ve earned on your CIS payslips. You only need three months’ records, although a year is good. Again, the more specialist we go, the higher the rate.

But if you’ve been a subcontractor or CIS contractor for 12 months it’s absolutely fine. There’s somewhere we can go that will use your gross income rather than your self-employed income.

Can you get a mortgage as a contractor inside IR35?

When IR35 came along we saw a reduction in people contracting, but it seems to have increased again now. We see more contractors these days.

From a mortgage lending point of view, there’s no difference. Whether you’re a limited company or you work through an umbrella company, if you’re on a day rate contract and you’ve got a bit of history and a contract going forward, you will be fine. IR35 has more of a tax and HMRC implication than a mortgage lender implication.

Do professional contractors get better mortgage deals?

No – we all get the same deals. Lenders give out their available interest rates, and you need to meet their criteria to get a mortgage. If you don’t meet the criteria, you can’t have them.

The occasional quirky lender has a professional product for doctors, accountants and jobs, but those are rarely better than what you get on the high street.

Can I get a mortgage on a temporary contract? Can I get a mortgage on a zero hours contract?

On zero hours contracts it’s fine, and temporary contracts are also fine but we need to know a little bit more about your history. Generally, most lenders are going to look for 12 months’ history.

Some people would just work through an agency and go from one client to the next. If you’ve got 12 months’ history with that agency, lenders will take your income into account. The same goes for zero hours – if we can demonstrate that you’ve been with the company for 12 months, you can get a mortgage. If you’ve been there less than a year, it will be really tricky.

Can I get a joint mortgage as a contractor?

Yes, there are no issues. Your income will be assessed however the lender does it for you and your partner will be assessed in line with whatever income they have.

What do I need to do to apply for a mortgage as a contractor should I find a specialist mortgage broker?

You definitely need a mortgage broker to help you. You can’t look this stuff up on comparison sites.

I’ve had instances before where someone says they’ve gone to a specialist Contractor Mortgage Broker, but that’s not necessary. We know exactly how to do it, but we don’t label ourselves as specialists for contractors. Most mortgage brokers that have been around a little while will be able to help you.

We have vast knowledge through years of experience of doing all sorts of different mortgages, so we know exactly what we can do for contractors. Don’t try and do it on your own because there’s lots of different lenders to consider for contractors – we’ll find the most suitable one for your situation.

Your home may be repossessed if you do not keep up with your mortgage repayments.

The Financial Conduct Authority does not regulate most Buy to Let Mortgages.

Why Vantage?