Can you get a mortgage as a contract worker?
Contract workers, also known as agency workers, work regularly but not in permanent employment. They can work on either a full time or part time basis. Contract workers are typically employed on temporary contracts or fixed term. They may be employed in construction, social work, retail or any other sector where project work is common.
The rise of contract work has left many people feeling uncertain about how banks and building societies will view the temporary nature of their employment when it comes to getting a mortgage or remortgage. But it is possible to get mortgages for contract workers. In fact, there are many types of mortgage deals and many different mortgage lenders.
If you are experienced in contract work and have had continuous employment in the same line of work for a number of years, as well as having a remaining term of the contract, this will work in your favour. Most lenders are updating their eligibility criteria due to the increasing number of people now opting for this type of employment.
Who can qualify for mortgages for contract workers?
If you have been working as a contractor for a few years and have built up a good track record, and have a good credit score, it is worth speaking to a Mortgage Advisor who has experience of giving mortgages to contractors, so they can help you find the right product for you. First time contractors are not ideal from the perspective of a mortgage lender, but a few will consider lending. If you have a previous continuous history of employment in the same line of work, both permanent and contract, it will improve your chances of getting a mortgage.
Typically, those applying for a mortgage as a contractor can get a mortgage provided their income meets the lender’s requirements. There are differences between lenders in terms of how they assess your income as a contract worker from zero hours contracts to fixed term contracts, professional contracts, CIS workers, IT contracts, rolling contracts, contracts through umbrella companies and locum professional contract.
If you don’t qualify for a mortgage from a typical lender, there are other options for you to consider. As specialist Mortgage Advisors, Greenacre Financial Services are here to help you with mortgages for contract workers. We understand how different types of pay work. We have access to lenders who can help if you are a limited company, a sole trader, fixed term or day rate.
With the right support and advice from a mortgage broker, with experience in mortgages for contract workers, getting a mortgage can be achievable and stress free.
What type of mortgages are available for contract workers?
Trying to navigate the differences between lenders on your own can be time consuming, confusing and often disheartening as a contract worker. Speaking to a Whole of Market independent Mortgage Adviser like us here at Greenacre, can help you to secure the best mortgage for your circumstances from the outset. Types of mortgages available to contract workers include:
Flexible repayment mortgages: With this type of mortgage, you can only borrow up to a certain percentage of your income. As your income increases, you can borrow more, but as your income drops, you won’t be able to borrow so much. If you can afford to pay back your mortgage in less time than the full term, you could save a lot of money in interest.
Interest-only mortgages: An interest-only mortgage allows you to pay off a lower monthly amount. As you are only paying the interest on the loan, you will need to save money in another account to cover the monthly repayments when the mortgage is due to end. When the mortgage ends, you have the option of either paying back the loan in full; or keeping the mortgage and continuing to pay back just the interest.
How much can I borrow as a contract worker?
Permanent employees simply calculate up to four times their annual income. For example, if you’re earning £50,000 a year, you can borrow up to £200,000.
For contractors, you can use this as a mortgage calculator to give you rough idea of your mortgage potential:
- Take your current day rate and multiply it by the number of days you work in a week
- Multiply this figure by 48 weeks
- Multiply this total figure by 5
This is a general benchmark, different lenders take varying approaches to assessing the borrowing capabilities of contractors, and the amount you can borrow will depend largely on your specific circumstances.
What else do I need to know about mortgages for contract workers?
The mortgage lender will need proof of your earnings. You will have to show them accounts including bank statements from your last two or three years of working. If you have been contracting for less time, please speak to the lender, as they may accept a letter from your accountant confirming your earnings.
Read our Top tips to get a mortgage if you’re self-employed blog which includes practical steps to owning your dream home.
Getting the right advice
Contract work does not have to be a barrier to owning a home. Whether alone or with a growing family, it’s never too early to start speaking to a Mortgage Adviser. We are a completely independent Whole of Market mortgage broker, abiding to a duty of care, offering a choice of around 100 lenders and up to 25,000 different mortgage schemes. Let us help you make your contract work count towards your future home.
For more information on getting a mortgage as a contractor please get in touch with Carly Burns at email carly@greenacrefs.co.uk.
For more information about any of our services, including mortgages for contract workers, please do not hesitate to get in touch by calling us on 0203 3939 222.
