Contractor mortgages
Find out everything you need to know about getting a mortgage as a contractor.
Can I get a mortgage as a contractor?
Being a contractor shouldn’t stop you from getting a mortgage; however, the process can be complicated.
Mortgage lenders prefer applicants who have a reliable, long-term occupation with a steady income. This is because it indicates to them that you’ll be able to afford your mortgage repayments for the long term.
As a contractor, it is much more difficult to prove your future earnings beyond the end of your next contract. To show lenders you can afford a mortgage, you’ll usually need to show at least two or three years of accounts when you apply and provide evidence of your current contract.
If your current contracts are ending in the near future, for example, in less than six months, lenders may ask if you have any future contracts agreed upon and could ask to see evidence of these.
Who is considered a contractor?
You could be considered a contractor by mortgage lenders if:
You’re self-employed, e.g. as a sole trader
You’re working for a company on a short or fixed-term contract basis
You’re an agency worker
You work on a zero-hours contract
You work as a contractor under an umbrella company
Most lenders will see you as a contractor if you take and work on one contract at a time. Your application will be assessed in the same way as most self-employed applicants, which means you may need to provide more information to prove your income.
What are the criteria for contractor mortgages?
Mortgage lenders assess your application by looking at several factors:
Contract length: Many lenders want to see that you have worked continuously for the last 12 months, ideally with the same employer.
Renewal history: Your chances of getting a mortgage will be better if you have a long history of contract renewals or if you have renewable contracts in place.
Remaining contract period: You will need to have at least six months remaining on your current contract to be eligible with most lenders.
Industry experience: If you have a proven track record in your field, you may be viewed more favourably by lenders, as it suggests you’ll be able to secure new contracts in the future.
Financial documentation: You will usually need to provide additional documentation, such as copies of contracts, payment history, and accountant-certified accounts, to prove your income.
When looking for a mortgage, using a lender that specialises in contractor mortgages can help. They understand how your income works and can offer tailored products designed to accommodate your unique circumstances.
How much will I be able to borrow as a contractor?
To get an idea of how much you might be able to borrow, use our mortgage calculator.
When working out how much you can borrow, lenders will look at:
Many lenders use your current day rate to work out an annual income based on working 5 days a week and 48 weeks a year. This is then multiplied by 4.5 times to determine what you could borrow.
As well as your incomings, lenders need to see your regular outgoings to understand what you can afford. For example, having several debts to repay can reduce how much you can borrow.
You will need to provide a deposit of at least 5% when buying a property. That means how much you can borrow will also be influenced by the size of your deposit and the property price.
As part of your assessment, lenders will check your credit report to understand how you have previously managed credit products. If you have a low score, how much you can borrow may be limited, or your application could even be rejected.
How to get a contractor mortgage
One of the best ways to find a contractor mortgage that works for you is through an expert broker. They can talk through your situation and requirements and then search the market for you, looking for the best deal.
Many high-street mortgage providers may struggle to offer what you need, but a broker can access lenders that specialise in mortgages for contractors.
A broker can also help with the paperwork required for your application. When you’re self-employed, you will need to provide extra documentation to prove your income, including:
Self-assessment tax calculations (SA302), as well as your tax year overview
Two or more years of accounts, ideally prepared by an accountant
A copy of your current contract, including the end date and earnings
Previous contracts to show your recent work history
Three months of bank statements
It’s worth checking your credit report before you apply. Make sure there aren’t any mistakes or out-of-date information, as this can negatively impact your score and your application.
It is also important to minimise any breaks from your employment, especially in the six months before you make your mortgage application. Mortgage lenders like to see a consistent pattern of work over time to prove continuous income.
Our expert says...
“Working as a contractor offers great flexibility, but it can make it more difficult to find a mortgage that is right for you.
Lenders like to see you have a reliable income, so you may need to jump through more hoops to prove your income. Speak to our expert advisors who can help you find lenders specialising in contractor mortgages.”
Contractor mortgages FAQs
Many lenders want to see at least 6 or 12 months left on your current contract when you apply for a mortgage. If you have less than this left, you may need to provide additional information, including:
Evidence of previous contracts to show regular work over time
Any agreements in place for future contracts
Reference from previous clients
You need to provide evidence that you will get more work in the future and will be able to afford your mortgage payments over time.
You should be able to get a mortgage with a 10% or even 5% deposit as a contractor; however, you will need to meet all the lender's criteria.
As a general rule, the larger the deposit you can save, the better. By contributing 20% or more, you’ll be able to access potentially more favourable rates.
If you work as a contractor for a limited company, your contract will fall under the off-payroll working rules (IR35). This means you will still be classed as self-employed, and the same assessment criteria will apply.
Your income will be based on your earnings from your salary and any dividends you receive. You may have to use your SA302 tax calculations as proof of your income if you don’t have any accounts available.
It is possible to get a mortgage if you have a poor credit score, but it will make it more difficult.
Your ability to get a mortgage will be determined by how bad your credit history is. For example, if your score is below average, you should still be able to get a deal. However, you may be unable to get the best interest rates or terms.
If your score is very low or you have a County Court Judgment (CCJ), your application will likely be rejected by the majority of lenders. It’s worth discussing your options with an expert mortgage advisor in this situation.
It is possible to get a buy-to-let mortgage if you’re a contractor, and you might find it easier to show that you can cover the repayments compared to a residential mortgage.
That’s because the affordability of a buy-to-let mortgage is largely determined by the potential rental income you’ll get from the property. However, you will still need to prove you earn a certain amount yourself, usually at least £25,000.
You can get a contract mortgage as a first-time buyer, but it could make it harder to find a good deal. You can improve your chances of getting your first mortgage by:
Saving up a larger deposit
Checking your credit record is up to date
Providing as much income evidence as you can
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Important info & marketing claims
You may have to pay an early repayment charge to your existing lender if you remortgage. Your savings will depend on personal circumstances.
Your home may be repossessed if you do not keep up repayments on your mortgage.
*The savings figure of £656 is based on Better.co.uk remortgage customers in April 2024. Read more on our marketing claims page.
We can't always guarantee we will be able to help you with your mortgage application depending on your credit history and circumstances.
Average mortgage decision and approval times are based on Better.co.uk's historic data for lenders we submit applications to.
Tracker rates are identified after comparing over 12,000 mortgage products from over 100 mortgage lenders.
As of January 2023, Better.co.uk has access to over 100 lenders. This number is subject to change.
For buy-to-let landlords, there's no guarantee that it will be possible to arrange continuous letting of a property, nor that rental income will be sufficient to meet the cost of the mortgage.