skip to Main Content

Common Contractor Mortgage Questions Answered

Get Personalised Mortgage Advice Today

0208 323 8989

Request a Callback
Can I get a mortgage as a contractor?

Last modified:

January 12, 2021

Can I Get a Mortgage as a Contractor? And Other Common Contractor Mortgages Questions Answered

Finding a mortgage as a contractor brings up a ton of questions for most self-employed workers. Some may even think they’ll not qualify for a mortgage unless they’re on someone else’s payroll. That’s not true!

In part two of our contractor mortgage series, let’s take a look at the most common questions we come across in conversations with our clients.

Remember, if you want a quick overview of how contractor mortgages work, hop on over to part one in the series.

Can I Get a Mortgage as a Contractor?

Yes!

If you have a steady income and a history of working in your industry before you started contracting, then you can apply for a mortgage as a contractor.

Check out part one of this series Getting a Mortgage as a Contractor for the detailed lowdown on getting a mortgage as a contractor.

Do I Have to Have 3 Years of Self-Employed Accounts to Apply for a Mortgage?

Lenders used to have the requirement that self-employed people must provide several years’ company accounts to prove stability of income before a mortgage application would be considered.

However, more and more mortgage providers are making a change to reflect the growing number of self-employed contractors and freelancers that make up the national workforce.

Most require two or three years’ company accounts but some will consider 12 months in some circumstances. Specialist lenders may offer favourable rates to self-employed workers, but you might not find them on the open market.

Speak to an independent mortgage broker before choosing a provider to make sure you’re getting the best self-employed mortgage deal. An independent broker is guaranteed to find the best deal for you: they have whole of market access and offer truly impartial advice.

Checkout today’s contractor mortgage best buys:

Purchase
LenderHalifax
Type2 year fixed
Rate1.06
Ltv90%
More info
Remortgage
LenderHalifax
Type2 year fixed
Rate1.06
Ltv90%
More info

Do I Have to Have a Current Contract to Apply for a Mortgage?

Even if you’ve been working regularly for several years through your limited company, it is unlikely you’ll be able to access the best mortgage as a contractor if you don’t have a current contract.

You may, however, apply based on your company accounts if you’re between contracts. Try to avoid having a break of anything more than a few weeks between contracts in the 12 months prior to your mortgage application.

Can I Get a Joint Mortgage as a Contractor?

It’s absolutely possible to get a joint mortgage with your partner or even your friends if you’re buying a house together.

You’ll need to provide the same information for the lender as you would applying for a single mortgage; however, having someone else on the mortgage may increase the amount you can borrow. You’ll also be able to save a larger deposit between you, which could reduce the cost of the mortgage, fees, and interest overall.

Do I Need to Save a Bigger Deposit to Buy a House as a Contractor?

In most cases, you can save the same deposit as anyone else to apply for a mortgage and buy a house. However, some contractor-friendly lenders will cap the loan-to-value limit at 80-85%, which means you may need a larger deposit for this type of mortgage.

Remember that saving a larger deposit – at least 15% or 20% of the total house price – will also reduce your mortgage repayments and costs.

What Are Contractor Mortgage Rates Like?

Contractor mortgage rates are similar to those available for salaried employees, although some may be slightly higher. However, the benefit of choosing a contractor-friendly mortgage lender is their specialist knowledge of your lifestyle as self-employed person. They recognise, for example, that your true income is higher than what you take as salary + dividends from your company.

What’s the Maximum Loan-to-Value Ratio for Contractor Mortgages?

The loan-to-value (LTV) ratio is the mortgage amount compared to the property value.

For example, if you want to buy a house for £100,000 and have a £20,000 deposit, you need an £80,000 mortgage. This would be a loan-to-value ratio of 80%.

The LTV may be restricted by some lenders for contractor mortgages. This is due to the perceived additional risks associated with daily rate-based income calculation for a self-employed contractor. However, there are many mortgage providers out there willing to offer mortgages without this cap.

You could find a mortgage provider willing to provide a 95% LTV on a contractor mortgage – they’re out there, you just need to know where to look!

Can I Get a Mortgage Through My Limited Company?

It’s unlikely that you can apply in the name of your limited company for a mortgage on your personal residence.

If you’re buying property for your business, the circumstances are different. This includes if you’re planning to purchase buy-to-let property as a revenue stream for your limited company.

Speak to us to find out more about your options for buying property for your business.

My Fixed Rate Term is Coming to an End – Can I Remortgage As a New Contractor?

If you’ve switched from paid employment to contracting in recent months, you may be worried about remortgaging options as a new contractor.

You could stay with your current provider and chose from the options available there. They won’t normally ask about your income situation – you’ll only need to provide evidence of income if you’re changing something about the mortgage, for example the term or the mortgage amount. However, staying with your existing provider will limit the choice of deals you can take.

Alternatively, as long as your contract is confirmed for a minimum of 6 to 12 months, you could remortgage with a specialist contractor mortgage provider. This will help you access different rates and deals that could save you significant money in the long term.

How do Mortgage Brokers Help Contractors Get a Mortgage?

Independent mortgage brokers have access to whole of market deals for contractors. That means they can also find deals that aren’t available to you, as a customer, if you went looking for them yourself.

What they recommend will always be the option that’s in your personal best interests, helping you to secure a great deal that could save you thousands of pounds.

For contractors, mortgage brokers offer an extra level of help. They can act as a mediator between you and potential lenders. They’ll be able to ask questions based on your personal circumstances without it affecting your credit score or chances of getting a mortgage accepted.

An independent mortgage broker also has the opportunity to ask for policy exceptions in some cases. For example, if you’ve not been contracting quite long enough to qualify for a mortgage with a particular lender, a broker can help to negotiate a mortgage for you.

Speak to an independent mortgage broker today if you’d like access to better mortgage deals as a contractor.

Additional information

A few years ago, there were only a handful of lenders, who could assess contractors’ income based on daily rate. Today there are dozens of lenders, which makes the market more competitive. As an example, another specialist lender has recently joined https://www.peppergroup.co.uk/siteassets/lending/pdfs/residential-criteria.pdf.

To get a feel for how differently lenders treat contractors, check out their mortgage lending criteria:

https://intermediaries.virginmoney.com/virgin/lending-policy/find-articles-a-z/

http://www.clydesdalebankintermediaries.co.uk/criteria/

As a matter of fact, Virgin and Clydesdale have agreed to merge, which will create a bigger contractor mortgage lender http://www.mortgagesolutions.co.uk/news/2018/06/18/clydesdale-group-seals-1-7bn-virgin-money-takeover/.

Lilla Dilliway

Our mortgage adviser extraordinaire.

Categories

Lilla, has been absolutely amazing.
From start to finish, she always kept use informed on how the mortgage application was going.
We had a few issues with the application due to my...
read more

terri burgh Avatar
terri burgh
07/06/2023

I worked with Agnes and Lilla very closely to secure a mortgage offer for my very complicated case.

While so many other morgage brokers and big offices turned me down, BlueWing...
read more

Lilla Kaputa Avatar
Lilla Kaputa
27/05/2023

My mortgage advisor was Agnes Siry and she was absolutely brilliant from the very beginning up until the very end. She was always at the other end of the phone... read more

Petra Zsoldos Avatar
Petra Zsoldos
15/02/2023

Such a good thing to have a peace of mind that my mortgage is really the best available one on the market and all the legal bits are in place.... read more

Tünde Kátai Avatar
Tünde Kátai
07/01/2023

Really enjoyed working with Saanja and the team. They went above and beyond to help us and were creative with their solutions. I truly believe we could not have got... read more

Sarah Fraser Avatar
Sarah Fraser
01/01/2023

Agnes was our guardian angel throughout our very first house purchase. It's a process that is full of questions, uncertainty and doubt and (at least for first time buyers) and... read more

Kristof Kiraly Avatar
Kristof Kiraly
22/11/2022

Saanya was amazing from start to finish and got our mortgage through really quickly. She was extremely helpful with brilliant advice to help us purchase our flat, Ours was tricky... read more

HKN B Avatar
HKN B
22/05/2022

Excellent service. Lilla was always available and went above and beyond to support with any question or query. Could not recommend highly enough.

Laura Flynn Avatar
Laura Flynn
22/02/2022

Worked with Lilla, it was really good working together, we have received all the service we needed - Thank you

Artyom Hudolij Avatar
Artyom Hudolij
02/11/2021

Lilla assisted me with a contractor mortgage and she was absolutely wonderful... she is extremely patient and knowledgeable. I had a LOT of questions and there were some personal circumstances... read more

Daniel Irvine Avatar
Daniel Irvine
30/06/2021

I highly recommend Lilla, Alexandra and the rest of the team. Out of all of the brokers I made enquiries to Lilla was the most thorough in the questions she... read more

Anne N Avatar
Anne N
05/03/2021

Couldn't recommend Lilla and the team highly enough. Very friendly and thoroughly professional throughout our (occasionally!) stressful journey to secure a mortgage in these crazy times. Answered all of our... read more

Adam Stiley Avatar
Adam Stiley
06/01/2021

I went through a number of less-than-helpful mortgage advisors before Lilla was recommended to me by a friend.
From the start the service provided was outstanding. Both Lilla and Alex were...
read more

Ben Hodder Avatar
Ben Hodder
07/12/2020

If it would be possible then I would give 10 stars out of the 5.
Lilla Dilliway is the best mortgage broker ever, very experienced, always available and has all the...
read more

Gabor Debreczeni-Kis Avatar
Gabor Debreczeni-Kis
06/12/2020

I would highly recommend the services of BlueWing Financials and would especially like to thank Lilla and Alexandra, our case handles.

I was in the process of purchasing my first...
read more

Ágnes Jakubisz Avatar
Ágnes Jakubisz
17/05/2020

Mortgage Tools

Back To Top