Contractor Mortgages: advice, information and quotation 2024

What is a contractor mortgage?

A contractor mortgage uses your gross contract rate to determine how much you can borrow for a mortgage, not your accounts or payslips. This method is called contract-based underwriting, and enables contractors to borrow much more than they would using more traditional underwriting methods available on the High Street.

If you've approached a lender direct or conventional mortgage firm, you'll know how complicated advisors make it for contractors to get competitive mortgages. Untrained advisors and agents often struggle to interpret limited company income or umbrella payment structures, so try to use your accounts or payslips as the basis of their calculations instead. This method is doomed to failure.

Having dealt with contractor-friendly lenders since 2004, Freelancer Financials can help you find the contractor mortgage your income and status deserve.

We’ll use your gross contract day rate to secure your mortgage with a competitive interest rate. Furthermore, you'll get a fully bespoke service with dedicated mortgage advisor and admin support. Here's an introduction to our company and our services:

Fill in this quick-fire form and one of our specialist contractor mortgage advisors will call you back:

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Day-rate mortgage calculator

Key to our success is not only understanding which mortgages suit our clients, but also understanding our clients' motivations and aspirations. If you have a plan for your life and career, it's only right that your homeownership dreams match that trajectory. Get them on the same page by initiating the conversation, here.

To work out how much you can borrow based on your day rate, use this calculator as a guide.

The more info you can provide upfront, the better prepared we can be when we get back in touch with you. So, if you're further along your homebuying journey, you can use the expanded form at the bottom of the page.

In the meantime, carry on reading for much more information about our mortgages for contractors, including how they work.

Benefits of using a contractor mortgage specialist

As a contractor, you can make getting a mortgage as hard or as easy as you like. Using a contractor mortgage specialist will help in several ways, namely because they:

• Have detailed knowledge of which lenders are genuinely contractor-friendly (and those which aren't);
• Work with you to understand your specific needs and your income structure, whether that's via a limited company, umbrella company or you're a freelancer/sole trader;
• Know how to get you the best rate available for your unique situation no matter where you are on the property ladder.

Contractors engaging a specialist advisor, like Freelancer Financials, for their mortgage will find someone who understands contract income, mortgage affordability and the contractor lifestyle.

They'll use that info to speak to specialist underwriters who use lending criteria that accept short-term contracts as proof of income. In most instances, there's no need for SA302s, payslips or accounts.

Your gross contract day rate is enough to secure a competitive mortgage that reflects your status.

Freelancer Financials' expertise doesn't stop at knowing which lenders will and won't accept your application. They've also been instrumental in helping banks and building societies develop tailored contractor mortgage lending criteria (contract-based underwriting). This is just one reason the team has won awards every year since 2014! Start that conversation by filling in this form.

You can now benefit from over two decades of their unrivalled groundwork:

How much can I borrow for my contractor mortgage?

Every contractor is different, as is every lender's specific contractor mortgage lending criteria. So, how much you can borrow for your contractor mortgage will depend on multiple factors, including:

• The size of the mortgage itself;
• How much deposit you’ve managed to set aside compared to the home's value;
• The duration over which you want to repay the mortgage;
• Your existing financial commitments you need to carry forward;
• Your credit history, including what credit agencies hold on record for you;
• How many dependants you’re responsible for and their respective ages;
• How long you’ve been contracting in your current industry (if it’s only a short time, they’ll need your recent work history too);
• Your contract rate and its duration.

As we've said, all lenders appraise contractors differently. But, to give you a general idea of how much you can borrow, you can use the slider calculator above or the following calculation:

• Your day rate in £;
• × 5 days per week;
• × 46 weeks per year;
• × 4.5, the average multiple contractor-friendly lenders use to calculate your mortgage affordability.

If you need a precise figure, start the conversation with Freelancer Financials by filling in this form.

5 top tips for a successful contractor mortgage application

Here are five elements you can control to help an underwriter view your application in the best possible light:

1.     Ensure your contract is up to date

Make sure you have a copy of your most recent contract and assignment schedule to hand when putting together your mortgage application. It s important to be able to show lenders not only how much income you have, but also how long you have remaining on your contract.

2.     Avoid lengthy breaks between contracts

There are many perks to working as a contractor, not least being able to take breaks between contracts. This is great for holidays or similar. However, you should try to avoid taking breaks of more than 6-8 weeks. This is because lenders ideally want to see consistent income and contracts stretching back 12-24 months prior to your mortgage application.

3.     Be realistic about your repayments

A common mistake many independent professionals make when searching for a contractor mortgage is being unrealistic when it comes to estimating their repayments. It s really important when putting your mortgage application together that you can afford the repayments you're committing to.

4.     Have at least a 10% deposit

Most lenders will require you to have a good-sized deposit when you apply for a contractor mortgage. Ideally, you should aim to have at least a 10% deposit ready to pay upfront. Not only will lenders look on you more favourably, but better interest rates also begin at 90% LTV (10% deposit).

5.     If suitable, look for mortgages that allow overpayments

Some contractors may find themselves with more money than they need on a regular basis thanks to high-value or frequent contracts. If this sounds like you, you should try to find a mortgage that allows you to pay chunks off in addition to your regular monthly repayments. This will enable you to take maximum advantage of your position and pay off more of your mortgage more quickly.

Other useful resources

• The mortgage guarantee scheme
• Buy to let tax help

Contractor mortgage enquiry form

Complete the Freelancer Financials mortgage enquiry form below for a full quote. Our brokers can get to work immediately to help you secure the mortgage your contractor status deserves.