UK contractor mortgages

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If you work as an independent contractor and run your own limited company, you may decide to look into getting a mortgage as a contractor. However, where is the best place to start when researching mortgages for contractors? An initial search for UK contractor mortgages should involve searching for specialist lenders who can find the best mortgage for you based on your circumstances. Searching for mortgages for contractors does not have to be complicated when you are in a contract role. Most importantly, you will need to obtain the proper contractor mortgage advice. Further, speaking to a contractor mortgage broker specialist who understands how a contractor works is best.

`Regular’ mortgage advisers, brokers, high street banks, and building societies are less versed in how contracting professionals earn their income. To clarify, they often deal with permanent employees, including those who work for an umbrella company or regular business owners, and many do not offer a mortgage for contractors, meaning that getting a contractor mortgage can be difficult.

Please note that it is often the case that most mortgage advisers cannot package your income for your mortgage application correctly. Therefore, when you speak to one of the best specialist mortgage brokers who are contractor-friendly mortgage lenders, this is an important factor when you look for UK contractor mortgages.

If you would like to know more about what mortgage you could qualify for,
please simply click on the button below for the contractor mortgage broker.

Other policies for contractors    

Being a contractor in the UK, there are other policies in addition to mortgages that are specifically for contractors. Therefore, these may be worth considering and are:

UK contractor mortgages -how much can you borrow

Now, back to mortgages. A specialist contractor mortgage broker will calculate your income by both:

  • Taking your day or hourly rate for your contract work;
  • Multiplying this by how many days or hours you work a week.

Then, once they calculate your weekly income, they will multiply this by how many weeks you work a year. Usually, this will be between 46 and 48 weeks per year. As a result, the figure that they come to is deemed to be your annual salary. There is a form below which you are welcome to complete and find out more.

How much you can borrow for your mortgage depends on your `affordability basis’. Therefore, in the simplest terms, mortgage lenders will consider your income and outgoings. As a rough guide, you can look to borrow anywhere from 3 to 5 times your annual gross income.

The evidence you need for UK contractor mortgages:

Please note that the types of ID that you will need when you apply for a mortgage are:

  • ID.
  • Your current contract.
  • Previous contract.
  • A contract extension (if you have less than three months remaining on your contract).
  • Three months of business bank statements.

Typically, a mortgage will last around 20 to 25 years. The same will apply to a mortgage for contractors. However, this can vary due to several factors. These include age, retirement plans, and monthly mortgage repayments. Therefore, when you set up your mortgage, you will decide the term (the length of the mortgage) according to your chosen repayment plan. As a result, the longer the term is, the lower the monthly repayment will be.

You can still apply for a UK contractor mortgage even if you have just started contracting. You must provide evidence that you are in the same line of work and industry. Our form below will help you determine what sort of mortgage you can obtain.

It is key that you get an AIP (agreement in principle) from a mortgage lender before you start house hunting. To clarify, an AIP is based upon a credit search and your income details, indicating how much they would lend to you. Although not set in stone, an AIP is a helpful guide and assurance for an agent. To sum up, it helps show that you can afford the property you are viewing. 

The different types of mortgages in the UK: 

First-time buyer contractor mortgage:

If you are a first-time buyer looking for UK contractor mortgages, you are in a good position. This is because there are many Government-backed schemes that can help you purchase your first home: 

UK contractor mortgages -Shared Ownership

The Shared Ownership scheme is a cross between buying a home and renting. As a result, you can own from a quarter to up to three-quarters of a property. As part of this, you will rent the remaining part of the property from the Government at a reduced rate.  

Contractor Remortgage:

When you consider a mortgage, if you are looking to move to another property or if your current mortgage deal has ended, you can consider a re-mortgage. Please note, this process is switching onto a new mortgage deal, whether with the same provider or a different lender. In doing so, you could save money in the long run. In addition, you could also request to borrow more for home improvements. 

UK contractor mortgages -Buy to Let:

Buy-to-Let mortgages for contractors are available for contracting landlords. Please note that these will allow them to borrow money to buy properties to let. Importantly, unlike normal mortgages, Buy-to-Let mortgages are on an interest-only basis. This means that for each month of the mortgage term, you will only need to pay interest on the loan. Therefore, the amount you borrow will have to be paid back at the end of the term. Consequently, it can be good in the short term as your outgoings will be less each month. However, it is important to have a plan to pay off the loan or refinance at the end of your mortgage term.

In contrast, with a ‘normal’ mortgage, your monthly repayments will cover the interest and a portion of the debt. As a result, over the mortgage term (assuming you meet every repayment), the value of the loan will be paid back. 

How to get a contractor mortgage

The best way to get a contractor mortgage is to speak to the experts if you are looking for a mortgage, remortgage or further mortgage advice. Please talk to our trusted contractor mortgage broker partner, Broadbench. They specialise in contractor-friendly mortgages and offer the best mortgages for contractors. They are specialists in UK contractor mortgages.

Their professional advisers have the skills and knowledge to offer you bespoke and impartial advice, taking in a holistic understanding of your circumstances and combining it with a deep knowledge of what different providers offer. Not only that, but they know how to quickly navigate the mortgage minefield and set up exactly what you require, seeking the best contractor mortgage rates available and taking the hassle out of your hands.

Download their Guide to Mortgages for tips and an A-Z of mortgage terminology.

Please complete the form below for the contractor mortgage broker if you would like to know more about what mortgage you could qualify for.

Find out more about contractor mortgages

Contractor Mortgages
Mortgage Type

Frequently Asked Questions

Being a contractor in the UK, you may be looking for a mortgage. This may prove difficult if you have less than twelve months’ worth of working history, as most lenders will need you to have been trading in this capacity for at least a year. In fact most will require that you must have at least 12 months of experience in the same line of work and have a contract that lasts for at least 6 months to be eligible for a contractor mortgage.

When you obtain a mortgage for the first time or even a re-mortgage, you will need a mortgage broker / financial advisor. Normal high street mortgage advisors do not tend to be able to offer mortgages for contractors. Therefore, you will need to consult a broker who specialises in UK contractor mortgages.

In general, it will usually take between two to six weeks to get a mortgage approved. The application process will be accelerated if you go through a mortgage broker who can find you the best deals that suit your circumstances. A mortgage offer is usually valid for up to six months.

Most mortgage providers will require a good credit history, before they will consider a loan. In general, you need a good credit score and to have no missed or late payments. The best thing to do is speak to a contractor UK mortgage broker specialist to find out your options.

Contractors do not fit the usual standard criteria for high street lenders. The rates available are the same for all occupation types, however not all lenders offer mortgages for contractors. As a result, the best thing to do is consult a contractor mortgage broker specialist. They will be able to find the best deals out there for you including some of the best on the market.

Published On: April 6th, 2024 / Categories: Finances, Finances post, Financials, Most Read Articles /

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