Mortgage on a Temporary Contract
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Mortgage on a Temporary Contract
Can I get a mortgage on a temporary contract? How does this work? What happens if your contract only runs for 12 months?
You can absolutely get a mortgage on a temporary contract, whether it’s a fixed-term or an agency job. On the whole, lenders will look for 12 months’ history of the same work. It doesn’t have to be the same contract, though, as long as you have 12 months’ experience in that industry.
Carers and warehouse operatives are often on these types of contracts to give the employer flexibility. When they need people, they have them available. But because that demand can fluctuate, lenders look for the history.
If you’ve been doing it for at least 12 months and you’ve got a consistent income, you’re obviously a good temporary contract worker, and the chances of you carrying on like that are relatively strong.
If the contract only runs for 12 months, that’s fine if you’ve got prior history. You might have been on a previous contract for 12 months, and now you’ve got a new one. Even if the current contract is shorter, it’s the history that’s important.
We need a few months left on that contract – if it ends tomorrow, that’s no good. But with three or four months left, plus the history, it should be okay.
What eligibility criteria do I need to meet if I am on a temporary contract?
The main thing is having that 12-month history and a few months left on your contract. If it ends next week, the lender will ask what’s happening next. They will expect your new contract to be in place, or for this one to have been extended or renewed. We would need something in place going forward.
Three months is the magic number. If you’ve got three months left on a contract and you’ve got the history, we can work with that.
How will lenders assess my income? What documents do I need to provide on a temporary contract?
As long as you’ve got that history, your income is assessed like anyone on a standard, permanent contract.
If you’re employed on a temporary contract, you’ll be getting a monthly or weekly wage, which we use to work out an annual income figure.
If you’re employed on a zero-hours contract and your income fluctuates, lenders will average that over a longer period of time – such as the last three or six months. They might even want 12 months’ payslips to get a fully accurate annual figure. Once we’ve got that total, it works just like anyone else.
How much can I borrow for a mortgage on a temporary contract? What deposit do I need?
Once we’ve established that annual figure, we multiply it up using the lender’s affordability calculator. That gives us a figure just as it would for anyone else. Getting that annual figure might just be slightly more complex. All the lenders will lend different amounts – some are much more generous than others.
In terms of a deposit, 5% is fine. Once you’ve ticked the overall criteria boxes for that lender, everything else remains the same. Lenders wouldn’t allow a 5% for the permanently employed and require contractors to have 10%. The same rules apply to everyone – it’s the same deposit and the same products.
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How does remortgaging work on a temporary contract?
If you’ve got the history, we can go to a new lender in search of the most suitable deal on the market. If you don’t have the history, we can’t go to another lender – but we can always just stay with your current lender and choose a new rate. They won’t ask any questions about your income.
In that situation, you can’t change the term or borrow more. You could borrow less or pay off a lump sum, but we can’t make any big changes. Remortgaging is going to another lender, and they will assess you as thoroughly as when you first applied.
But if we don’t tick that criteria box, your current lender won’t end your current mortgage. They won’t even ask about your income or employment. As long as your mortgage is up to date, you can just choose a new rate with them.
It’s not always going to be the most suitable rate, because you haven’t got the choice.
But generally you won’t go too far wrong.
Can I get a Buy-to-Let mortgage on a temporary contract?
We’re a lot less concerned about your income on Buy-to-Let – and the same goes for a limited company Buy-to-Let, depending on which way you want to go.
We’re more interested in the rental income covering the mortgage, plus a certain margin. That’s what’s most important. Some lenders want you to have a minimum income, a good handful of others don’t. There are various options for a Buy-to-Let mortgage on a temporary contract or any other kind.
Can I apply for a mortgage on a temporary contract if I have bad credit?
You can apply for one – whether you’ll get it or not is another matter. If you’ve ticked the history box, that’s fine; now we need to tick the credit box. This is where the lender’s system checks your credit score and credit record.
It depends on how bad that is. If you were late paying your credit card two and a half years ago, it’s not going to make any difference now. But if you’ve had three defaults and six CCJs within the last six months, that’s a big challenge on a temporary contract or anything else.
But having a temporary contract doesn’t stop you from getting a mortgage with bad credit – there are lenders we can go to. It might be a high street lender if it’s the odd little blip, or we might need to go super specialist. We’ll look at your situation and give you personalised advice.
How can I improve my chances of securing a mortgage as an agency or temporary contract worker?
It’s all about the timing. Make sure you’ve got 12 months’ history, which probably isn’t too helpful if you’re three months in – that’s quite a long wait. But that’s the biggest thing we need.
Make sure everything’s paid on time and your credit’s as good as it can be, and you’ve got your deposit ready. Check you’re on the electoral roll, as that helps your credit score as well.
How do I apply for a mortgage on a temporary contract? How can a mortgage broker help?
Speak to a mortgage broker, because we know which lenders to go to and which to avoid, especially if there are any credit issues. We know the lenders’ little quirks and how their criteria might let the odd thing through.
Just save yourself hours of research and talk to a mortgage broker – ideally us, but there are other good ones out there too.
Key Takeaways:
- You can get a mortgage on a temporary or zero-hour contract, but lenders generally require you to have 12 months’ history in the same industry or job. You also need to have at least three months remaining on your current contract.
- Lenders assess your income to determine an annual figure, similar to a standard permanent contract. For zero-hours contracts where income fluctuates, lenders will average your income over a longer period, potentially requiring up to 12 months of payslips.
- A 5% deposit is generally acceptable, and the deposit and product rules are the same for temporary contract workers as for permanently employed individuals. The amount you can borrow is calculated using the lender’s affordability calculator based on your established annual income figure.
- If you lack the required 12 months’ history, you cannot remortgage with a new lender. However, you can stay with your current lender and choose a new rate without them assessing your income or employment, though you cannot change the term or borrow more.
- To improve your chances, focus on meeting the 12-month history requirement, ensuring good credit, and registering on the electoral roll. It is recommended to speak to a mortgage broker, who can save time on research and identify lenders suited for your unique situation, including if you have bad credit.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE SOME FORMS OF BUY TO LET MORTGAGE.
The information contained within this article was correct at the time of publication but is subject to change.
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