Securing a mortgage as a contractor often involves more complexity compared to individuals in permanent employment. Due to differences in income structure, mortgage providers apply alternative methods when evaluating affordability. In this guide, we examine how different types of contractors are assessed and highlight where contractors can access the most suitable mortgage options.
Are there specific contractor-friendly mortgages?
Yes, suitable options are available, but the ideal mortgage lender will depend on the nature of your contract work. Numerous lenders in the UK provide contractor-specific mortgage solutions designed to reflect different trading models and income patterns.
While some lenders categorise contractors under self-employed criteria, others adopt a more specialised assessment, considering factors such as your contract rate, recent payslips, or historical income to determine affordability.
Types of contractor mortgages
Below is a brief summary explaining how various types of contract work can impact your mortgage options.
Limited Company Contractors
For those working through a limited company, certain lenders calculate income based on salary and dividends, while others may include retained profits, potentially increasing your borrowing potential. Some specialist lenders offer a more flexible assessment, using your day rate rather than relying solely on tax return figures to determine affordability.
Umbrella Company Contractors
Contractors operating through an umbrella company are considered employees, with income typically verified through payslips and often assessed in line with PAYE employment criteria. Depending on your tax arrangement, some lenders favour this structure, while others may continue to evaluate affordability using contractor-specific methods such as your contract rate.
Sole Traders and Self-Employed Contractors
For sole traders, most lenders request between one and three years of SA302 forms and corresponding tax calculations from HMRC. Affordability assessments are generally based on your net profit after allowable business expenses. As a result, substantial deductions for operating costs can lower the amount you may be able to borrow.
Freelancers and Gig Economy Contractors
Mortgage options for freelance contractors can benefit individuals in creative or project-based roles—such as writers, designers, developers, and those undertaking multiple short-term engagements, including delivery and rideshare drivers.
Lenders typically categorise freelancers as self-employed and often require a minimum of 12 months of income history. However, in some cases, specialist lenders may consider applicants with just 6 months of verified earnings.
Zero-Hour Contracts and Agency Workers
Securing a mortgage on a zero-hours contract can be more challenging, though it remains achievable. Some lenders will consider applications from zero-hour workers if you can demonstrate a stable income pattern over a minimum of 12 months, along with a reliable work history in your sector. Similarly, agency and temporary workers may find a more limited selection of lenders, but suitable options are still available.
Locum and Professional Contractors
Professionals undertaking locum work—such as GPs, pharmacists, or nurses—often operate on a contract or day-rate basis. A number of lenders have developed specific policies to support these roles. In some cases, lenders may consider all or part of this income, and long-term locum positions are often viewed positively due to sustained demand within the healthcare sector. However, lending criteria can vary significantly.
Fixed-Term Contractors
If you are working under a fixed-term contract—typically lasting 6 or 12 months—many lenders may evaluate your application similarly to that of a permanent employee, particularly if you have a consistent history of contract renewals or similar roles. Generally, at least 6 to 12 months of continuous employment strengthens your application, though temporary contracts may still present additional challenges during the mortgage assessment process.
Eligibility Criteria for Contractor Mortgages
When assessing a mortgage application from a UK contractor, lenders consider several key factors:
- Contracting History: Most lenders prefer to see at least 6 to 12 months of consistent contracting experience. A stable work history—especially within the same industry—strengthens your case by demonstrating reliability. Gaps in employment may raise concerns unless clearly explained with supporting context.
- Type of Contract Work: The structure through which you operate—be it a limited company, umbrella company, agency, or as a sole trader—affects how your income is assessed. Some lenders are more familiar with specific setups, which can influence both your eligibility and borrowing potential.
- Current Contract Length: Lenders typically review how much time remains on your current contract. While some require a minimum of 3 to 6 months left, others may accept rolling contracts or a record of repeated renewals as evidence of continued employment. The greater the perceived security, the more favourable your application.
- Documentation Requirements: You’ll need to provide supporting documents depending on your working structure. Common requirements include recent payslips (if applicable), bank statements, and your current contract. Limited company contractors may also need to supply company accounts and SA302s, while sole traders are usually asked for 1 to 2 years of tax returns.
- Deposit Amount: Contractors are generally expected to contribute a deposit of at least 10%, equating to a 90% loan-to-value (LTV) ratio. Some specialist lenders may offer up to 95% LTV if your income is consistent. A larger deposit can improve your chances of approval and potentially secure more favourable interest rates, though this is not guaranteed.
- Credit History:Your credit record plays a crucial role in the mortgage decision. A clean credit file simplifies the process, but lenders may still consider applications with missed payments or other adverse credit. In such cases, specialist lenders may be required, particularly if issues are recent or severe.
- Industry and Employment Stability: Contractors working in sectors with sustained demand—such as IT, finance, healthcare, or engineering—may be viewed more positively. Those new to contracting may benefit from having prior PAYE employment in the same field, as lenders often regard this as a sign of career continuity and stability.
How much can you borrow?
Your borrowing potential as a contractor depends largely on how a lender assesses your income. Two primary methods are typically used:
- Payslip-Based Assessment: If you are employed through an umbrella company or paid via PAYE, some lenders will determine your annual income by averaging your most recent payslips—commonly over a three-month period.
- Contract-Based Assessment;For contractors earning a day rate, certain specialist lenders may use a contract-based calculation. This usually involves multiplying your day rate by 5 (for a standard working week), then multiplying that figure by either 46 or 48 weeks. This approach can result in a higher calculated income compared to the payslip method, potentially improving your affordability.
Once your annual income is confirmed, most lenders will offer borrowing at approximately 4.5 times your income. However, under strong financial circumstances, this could extend to 5, 5.5, or even 6 times your income, depending on the lender’s criteria.
How to get a contractor mortgage
Applying for a contractor mortgage can be complex, as comparing home loans and interpreting each lender’s criteria may feel overwhelming. Banks and mortgage providers assess contractor income differently, whether it’s based on a day rate, payslips, or company accounts—all of which can significantly influence the lending outcome.
Consulting a mortgage adviser who specialises in contractor applications can save considerable time and effort, and may also result in better financial outcomes. A knowledgeable broker will understand which lenders are most accommodating to your contracting structure and can guide you in presenting your income to maximise your borrowing potential.
Best banks and lenders for contractor mortgages
Which High Street and Mainstream Lenders Offer Mortgages to Contractors in the UK
Halifax
Regarded as relatively contractor-friendly, Halifax may regard contractors earning over £500 per day (or £75k+ per year), particularly IT professionals, as employees. This means that income can be assessed without relying on company accounts. Applicants typically need a minimum of 12 months’ continuous work and at least six months remaining on their current contract.
Santander
Santander generally adopts a more cautious stance on contractor mortgage applications. Self-employed applicants are usually expected to provide two years of accounts. Those working through an umbrella company are also treated as self-employed. For PAYE contractors, Santander requires two years of P60 forms and a direct contract with the end-client (not the umbrella provider).
Royal Bank of Scotland / NatWest
RBS and NatWest may offer mortgage solutions to agency workers and individuals on zero-hours contracts, provided you have at least 12 months of contract history and a minimum of three months remaining on the current contract. They are known to be more flexible with high-income contractors or those working on a day rate.
Ultimately, if you’re seeking a contractor mortgage that aligns with your particular circumstances, it’s advisable to consult a specialised mortgage adviser. A specialist broker can fully evaluate all your income channels and guide you towards the lender most likely to offer attractive terms.
Let me know if you’d like any further adjustments!
Mortgages for subcontractors
Subcontractors and Mortgage Applications
Subcontractors—particularly those working in sectors like construction—often encounter difficulties securing a mortgage due to variable income patterns. In most cases, lenders will assess subcontractors as self-employed and require a minimum of 12 months’ tax returns or payslips to evaluate affordability.
However, some lenders with experience in the Construction Industry Scheme (CIS) may take a more flexible approach. These lenders might assess gross earnings from recent payslips and treat you as employed for mortgage purposes, potentially simplifying the application process and reducing documentation requirements.
Frequently Asked Questions
Yes, obtaining a mortgage is still possible, but it may involve additional complexity. If you fall within IR35, lenders are likely to assess your income similarly to that of an umbrella company contractor or PAYE employee. You’ll typically be required to provide payslips and may also need to demonstrate a history of consistent contract renewals. Engaging a specialist mortgage broker can be highly beneficial in guiding you through the process and helping present your income in the most favourable way.