A mortgage that reflects the way you earn.

Why contractor mortgages need more careful handling

“Contractor” is not one type of employment. You might work through your own limited company, an umbrella company, an agency or directly for the organisation named in your contract.

Each lender has its own way of assessing this income. One may use your day rate, another may rely on payslips, while another could treat you as self-employed and assess your accounts or tax calculations.

The lender may also consider:

• Your current day or hourly rate
• How long you have been contracting
• The time remaining on your contract
• Previous contracts and any gaps between them
• Your experience in the same profession
• Whether you work through a limited or umbrella company
• Your shareholding and any business expenses
• Whether the contract falls inside or outside IR35

We identify the lenders whose criteria fit the way you actually work, then provide the evidence the underwriter expects to see.

Day-rate contractors

Some lenders can calculate your income from the value of your contract instead of relying solely on your salary, dividends or tax returns.

There is no single calculation used across the market. Depending on the lender and contract, your day rate may be multiplied by the number of days worked each week and an assumed number of working weeks each year.

For example:

£400 a day × 5 days × 46 weeks = £92,000 assessable annual income

That does not mean every lender will use £92,000 or agree the same mortgage amount. Some use a different number of working weeks, take the lower of several calculations or make deductions for business expenses. Contract history, shareholding, affordability and credit history will still matter.

However, where you retain profit within your company or take a relatively modest salary and dividends, a contract-based assessment could produce a more representative picture of your earning capacity.

We will compare the available assessment methods and use the one that provides a suitable and sustainable outcome.

CIS contractors

Construction Industry Scheme income is treated very differently between lenders.

Some lenders can assess a CIS subcontractor using their gross CIS income, supported by recent payslips or payment statements and corresponding bank statements. Others will treat the applicant as self-employed and request two years of accounts, SA302s or tax-year overviews.

Choosing the wrong lender could mean your income is assessed less favourably or that you are asked for documents you were not expecting.

We will check:

• How long you have worked under CIS
• Whether you are paid weekly, fortnightly or monthly
• Your gross income before CIS deductions
• The consistency of the payments received
• Whether you also operate through a limited company
• Which evidence is available to support the application

We can then approach a lender that understands your income and accepts the documents you can provide.

NHS training contracts

A fixed-term NHS training contract does not automatically mean you must wait years before applying for a mortgage.

Some lenders treat trainee and junior NHS professionals as permanent employees, despite the time-limited wording of their current placement. This can include foundation doctors, specialty registrars, trainee nurses and other recognised training roles.

Other lenders apply their normal fixed-term contract rules, making the choice of lender particularly important.

We will look at your appointment, current income, stage of training and likely career progression before identifying suitable options. NHS bank work and locum income can also be considered, although lenders may require a longer earnings history for these additional income types.

Limited-company and umbrella contractors

If you contract through your own limited company, some lenders will assess the salary and dividends shown on your tax documents. Others may be able to use the current contract value instead.

Your shareholding matters. A lender may adjust the usable contract income if other people own part of the company, and it may also take account of significant business expenses.

If you are paid through an umbrella company, lenders will usually want to see the contract and recent payslips. Some also require a minimum history of contracting or working through the umbrella.

Being inside IR35 does not automatically prevent you from getting a mortgage. It changes how you are paid and can affect which evidence a lender requires, so it needs to be considered before selecting the lender.

New to contracting?

Starting your first contract does not necessarily rule you out.

Some lenders want an established contracting history, while others will consider your previous experience in the same profession, the length of the new contract and how much time remains.

Moving directly from permanent employment into a contract role within the same industry can be viewed differently viewed differently from starting an entirely new career.

Speak to us before assuming that you need one or two years of accounts. Depending on your contract and professional background, other options may already be available.

What documents might you need?

Requirements vary, but it helps to have the following ready:

• Your current contract and any recent previous contracts
• Recent personal bank statements
• Business bank statements, where applicable
• Umbrella-company or agency payslips
• CIS payslips, vouchers or payment statements
• Your latest accounts, SA302s and tax-year overviews
• Evidence of relevant professional experience if you are new to contracting
• Proof of your deposit and its source
• Photo identification and proof of address

We will tell you exactly what is required before submitting the application.

Your contract does not fit one of these categories?

That is not a problem.

We also work with fixed-term employees, agency workers, freelancers, IT and engineering contractors, locums, consultants and people with income from several sources.

We will read the actual contract, understand how you are paid and identify the lenders whose criteria fit your circumstances. That individual assessment is the most important part of contractor mortgage advice.

Apply online or call 01225 258900 to speak to a friendly mortgage expert.