Contractor Mortgages

First off, there is no such thing as a “contractor mortgage.” There are, however, lenders who specialise in dealing with contractors. In any case, there are certain things to consider when applying for a ​mortgage​ as a contractor.

What Is A Contractor Mortgage?

First off, there is no such thing as a “contractor mortgage.” There are, however, lenders who specialise in dealing with contractors. In any case, there are certain things to consider when applying for a ​mortgage​ as a contractor.

Due to the nature of the work, contractors don’t have a stable income compared to people who are in full-time employment. This raises the risk for lenders and can make it harder for them to calculate your ​mortgage affordability​ (how much money they can lend you).

However, it’s still very much possible for a contractor to secure a mortgage — you just have to provide sufficient documentation in order to convince a lender that you can afford to repay your mortgage. Here’s what you need to know about securing a mortgage as a contractor.

Things Mortgage Lenders Will Look At

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Things Contractors Need To Provide To A Lender

  • 2 to 3 years’ worth of accounts. If you’re a ​limited company​, provide your lender with your full business accounts.
  • Evidence of previous contracts, contract renewals and future contracts lined up.For contractors who haven’t been operating long enough to have 2 to 3 years’ worth of accounts, some lenders will accept six months’ worth of accounts, depending on what type of contract worker you are and other factors like your ​credit score​ and the size of your deposit.

How Lenders Assess Your Income

Because contractors don’t earn a stable income like people who are in full-time employment, it can be more difficult for lenders to ​calculate how much they can lend you and how likely you are to meet your mortgage repayments​. However, there are multiple ways lenders assess your income, depending on how long you’ve been a contractor.

  • Average Income — Lenders will usually look at your earnings over the last few years (usually 2 to 3 years) and calculate an “average income.” For example, if you earned £20,000 one year and £30,000 the next, they’ll take your average income as £25,000. Then they use this info to figure out how much you can afford each money in mortgage repayments.

However, lenders may avoid this approach if your earnings vary drastically from year to year. Instead, they might base it on the lowest year or your most recent year, which may reduce the amount you’re able to borrow.

  • Day Rate — Some lenders approve mortgage applications on day one of your contract, so long as the contract is for at least six months. They’ll multiply your day rate by the number of days you work in a week or a month and use this figure to calculate your mortgage affordability.


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How To Improve Your Chance Of Getting A Mortgage As A Contractor

  • Put down a larger deposit. The bigger deposit, the lower the risk for the lender.
  • The more documentation you provide, the better. This helps to reassure a lender that you have enough money coming in and can afford your mortgage repayments.
  • Limit your time off in between jobs, especially in the run up to getting a mortgage. Lenders might not look at you as favourably if you’re out of work for more than 2 months during a 12-month period.
  • Get your finances in order. ​Improving your credit score​ and providing evidence of financial responsibility can be a big help when you don’t have a stable income.


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How We Can Help If You’re A Contractor Looking For A Mortgage

Depending on the type of contract worker you are, mortgage lenders may ask for different requirements before approving you for a mortgage. As a contractor, this can make the process of securing a mortgage more complicated, which is why it’s important to seek expert advice.

Huxley Mortgage Services​ are Cheshire mortgage brokers you can trust. Our team of friendly, professional and experienced advisors can help you to find a suitable lender and the best contractor mortgages in Chester based on your situation while helping you to navigate the application process.

If you’re a contractor looking to get a mortgage and are based in the Chester area, ​get in touch with us​ today.


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