Getting a mortgage when you're a contractor. The system wasn't built for you. Is that finally changing?

I’ll be honest: I sorted my mortgage before I went full-time freelance. Not because I couldn't have applied as a contractor, but because I'd heard enough to know it wouldn't be straightforward, and I didn't want to find out first-hand mid-transition. Sensible, maybe. (Don't come for me, Barclays.) But also a little telling about the state of the market.

Three quarters of self-employed people don't believe they can get a mortgage, according to Pepper Money's Specialist Lending Study. The research shows self-employed adults actually want to own homes at a higher rate than employed workers, with 80% aspiring to buy compared to 73% of full-time employees. The ambition is there, but confidence isn't.

As John Yerou, CEO of Freelancer Financials, who has spent over 20 years pioneering contractor-based underwriting in the UK, puts it: "The biggest mistake contractors make is assuming every broker or lender understands this market. Many don't."

Why the numbers don’t add up

It's not hard to see why contractors feel locked out. The same financial decisions that make contracting work, keeping your declared salary low, timing dividends carefully, leaving profit in the company, look very different to a mortgage lender than they do to your accountant. Tax efficiency and borrowing power pull in opposite directions, and most contractors only discover that tension when they're already mid-application, wondering why the number on the screen is so much lower than they expected.

John sees this constantly. "Most contractors are advised by their accountants to minimise personal income for tax efficiency, and there's nothing wrong with that strategy. The accountant is doing their job. But if they then approach a mainstream lender or an inexperienced mortgage broker, it can make affordability appear much lower than it really is. A contractor can easily generate six figures in company revenue while only declaring a fraction of that personally. To a traditional lender, that can look like low income. To a contractor-friendly lender using contract-based underwriting, it's completely normal."

The difference in how income is calculated can be significant. Specialist lenders increasingly annualise day rates using a formula based on the day rate multiplied by five days and 46 to 48 working weeks. A contractor earning £500 a day may only show £50,000 to £70,000 on their SA302s, but a specialist lender could annualise their contract income closer to £110,000 to £120,000. That completely changes borrowing power, and it's a calculation most high street lenders simply won't make.

Jo Elwell, Co-Founder of Contractor Financial, echoes the broader point. "Too many contractors optimise for tax without realising the impact on borrowing — and others overcorrect, increasing income unnecessarily when it's not required." The answer, as with most things in contracting, is planning well ahead of when you actually need it.

There's also a persistent misconception about what lenders actually need. Most contractors assume that if they don't meet the published criteria to the letter, that's the end of it. George Yerou, who works alongside his father at Freelancer Financials, pushes back on that. "Around 50% of the cases we submit don't even meet the lender's criteria on paper. But if you know where to go and can position the case on its merits, you can often get it through." The published criteria, in other words, is often the floor rather than the ceiling. It just depends on whether you have someone in your corner who knows how to present the case correctly.

How the market got here

The contractor mortgage market didn't improve by accident. John Yerou has been working in this space since 2004, initially as a generalist broker before recognising that contractors operating through limited companies were being systematically underserved. His brother ran an accountancy practice dealing primarily with IT contractors, people billing £300 to £1,000 a day but drawing modest salaries and retaining profits, and their accounts bore no resemblance to what they could actually borrow.

"I started researching the market to help those clients," John explains. "I found there were one or two lenders willing to accept contractors based on their day rate. Halifax was one of them — they understood it because they hired contractors themselves for project work." But the flexible workforce extended well beyond IT, and John went on what he describes as a crusade to educate lenders more broadly. "I was going into Liverpool Street, meeting with Nationwide and so many lenders, running trials and pilots with them. Once I got a handful willing to do it, I thought: this is it."

That groundwork eventually led to the founding of Freelancer Financials, and to what John calls contractor-based underwriting: a model that assesses affordability on day rate rather than drawings alone. There are now more than 30 lenders willing to assess contractors this way. But there's an important catch that most contractors don't know about.

"The truth is it's those specialist underwriting teams within lenders that are hidden away in some head office," John says. "If you walk into a branch or call a call centre, even though that lender may have specialist people willing to assess you differently, you don't have access to them." Going direct, or through a broker who doesn't specialise in this market, means most contractors never reach the underwriters who could actually help them.

What’s actually changed

The range of options available has expanded significantly. George notes that the contractor profile itself has become far more varied and complex over time. "In the past it was mainly the limited company contractor. Now you've got the umbrella contractor, fixed-term contracts, people with two contracts running simultaneously, directors with a spouse as a shareholder for tax efficiency. As contractor arrangements have evolved, lenders have tried to keep up."

He gave a recent example that illustrates what a specialist broker can actually do. A client had been rejected by Barclays the previous Saturday, his wife in tears. The case was genuinely complicated: two simultaneous contracts at different day rates, a 25% shareholding split between husband, wife and a business partner, and a pylon in the garden of the property. "He just thought he had absolutely no chance. But we got a mortgage offer within three days."

Jo has observed similar progress from her own practice. "A big part of the last 15 years has been educating lenders not to disadvantage contractors based on how they're paid. Progress has been strong, with more lenders supporting inside IR35, outside IR35 and CIS — but consistency across the market is still lacking." Knowing which lenders genuinely understand contractor income, rather than the ones that say they do and fall apart at underwriting, remains the key variable.

There's also movement at the regulatory level. The FCA has acknowledged the self-employed as an explicitly "underserved" group and has proposed reforms to make the mortgage market work better for people with variable or irregular incomes, including greater payment flexibility for contractors and freelancers.

The IR35 complication nobody mentions

Your working arrangement matters more than most contractors realise. Outside IR35 contractors are sometimes incorrectly treated as traditionally self-employed, triggering requirements for minimum trading history and limiting affordability to salary and dividends alone. Inside IR35 and umbrella arrangements bring different headaches, with payslips showing multiple deductions and contract gaps that lenders unfamiliar with these structures can misinterpret entirely.

"Contractor income doesn't fit neatly into standard underwriting models, which is where many applications go wrong," says Jo. "Going direct can lead to misinterpretation — from day rate being ignored to payslip deductions being misunderstood."

John also flags a specific misconception around trading history. "What lenders say online about their criteria is not always what we've agreed with their specialist underwriters. With Halifax, for example, you don't need a year's worth of contracting history. You can go from permanent employment, set up your limited company, and from the day you sign a contract, as long as you've been in the same occupation for one to two years, they will take you. But if someone goes direct or through a non-specialist broker, they may have tried Halifax already and been told no, without the case ever being presented correctly."

What to do about it

First, a word on timing and the current market. Mortgage pricing has improved since the post-mini-budget era, but lenders are repricing more aggressively in 2026 as swap rates move around quickly. John is clear on what that means in practice: "Products can disappear or worsen with very little notice. If you're buying or remortgaging in the next three to six months, getting a Decision in Principle and moving quickly to full application is more valuable than it used to be."

The retained profits question catches many contractors off guard. John explains that lenders take very different approaches. Some ignore retained profits entirely and assess only on salary and dividends. Others will factor them in, particularly where the contractor is the sole shareholder with clear control over the business. George adds a specific warning about tax efficiency measures that feel sensible but can damage a mortgage application. "If you've put money into a pension or bought an electric car through the company, lenders will look at your accounts and see reduced profit. Even if you want to be assessed on salary and dividends, they'll look at whether the profit was actually there to draw from in the first place. Don't do that if you want to get a mortgage in the next couple of years."

"Preparation also helps," adds John. "Clean accounts, consistent invoicing, stable banking conduct, and up-to-date contracts all strengthen the case considerably. Sometimes accountants don't fully understand mortgage criteria — their job is to minimise tax, and that's not always the same as putting you in the best position to borrow."

Jo's advice on timing is consistent: start thinking about this 12 to 24 months before you want to buy. "Something as basic as your credit profile can have a significant impact — yet it's often overlooked." If you're planning any kind of income gap, a sabbatical, a career change, a slower period between contracts, get your mortgage in place before that gap starts affecting your average income calculations.

John's closing advice for contractors looking to secure a mortgage in 2026 centres on something most people overlook until it's too late. "Ensuring your credit history and credit score is as good as it can be really does matter," he says. "And speak to a specialist mortgage broker early, so you can ascertain what your affordability actually is. That way you end up looking for properties you can afford, rather than wasting anyone's time."

George's final tip is about rate monitoring, something most contractors don't think to ask about. "Once a mortgage offer is issued, a lot of brokers just leave it there. What we do is track and monitor rates right up until completion. If the rate drops, we change it for the client. In a volatile market where rates are moving constantly, that can save thousands of pounds." If you're engaging a broker, it's worth asking whether they offer that service.

Going into this, I assumed contractors were working with a significantly narrower set of options than full-time employees. Having spoken to the people who work in this market every day, that's not quite right. The options are there. The nuance is understanding which lenders will actually work for your specific situation, how to present your case correctly, and why going direct or through a non-specialist broker can close doors that aren't actually closed. The market has moved further than most contractors realise. But it rewards preparation, and it rewards going to the right people early. Don't leave it to chance, and don't leave it to the last minute.