Contractor Mortgages

Getting a mortgage as a contractor can be more complex than for someone in a permanent role. Since your income might be structured differently, the way mortgage lenders assess affordability varies. Here, we’ll explore how various contractors are treated and where contractors can get the best mortgages.

Are there specific contractor-friendly mortgages?

Yes, there are, but the right mortgage lender depends on the type of contract work you do. Many UK lenders offer contractor-friendly mortgage products tailored to accommodate various trading styles and income structures.

While some treat contractors like self-employed applicants, others take a more tailored approach, using your contract rate, payslips, or income history to calculate affordability.

Types of contractor mortgages

Below is a brief summary explaining how various types of contract work can impact your mortgage options.

Limited company contractors

If you operate through a limited company, some lenders will assess your income using salary and dividends, while others may also consider retained profits (this can help maximise your borrowing capacity). Specialist lenders may also assess affordability using your day rate instead of tax returns.

Umbrella company contractors

If you work under an umbrella company, you're technically employed, and your income is usually assessed via payslips, often treated similarly to standard PAYE employees. Depending on how your tax is paid, some lenders prefer this setup, while others may still apply contractor-style assessments using your contract rate.

Sole traders and self-employed contractors

If you're registered as a sole trader, lenders typically require one to three years of SA302s and tax calculations from HMRC. Affordability is typically based on your declared net profit after expenses, which can reduce your borrowing potential if you deduct significant business operating costs.

Freelancers and gig economy contractors

A freelance contractor mortgage could be useful for writers, artists, designers, developers, and creatives, or those doing multiple short-term gigs (including delivery drivers, Uber and rideshare drivers).

Lenders usually treat you as self-employed and want to see at least 12 months of income history, though some specialist lenders may be able to work with 6 months of income in certain cases.

Zero-hour contracts and agency workers

With a zero-hours contract, getting a mortgage can be more difficult, but not impossible. Some lenders accept zero-hour workers if you can show a consistent income pattern over at least 12 months and a strong track record of work in your field. Agency and temporary workers also have access to a smaller pool of lenders.

Locum and professional contractors

Locum work by professionals (perhaps GPs, pharmacists or nurses) is often on a contract or day-rate basis, and several lenders have policies tailored to these professions. Some lenders let you use part or all of this income, or treat long-term locum work favourably due to high demand in healthcare. However, this varies.

Fixed-term contractors

If you’re employed on a fixed-term contract with a set end date (perhaps 6 or 12 months), lenders may assess you more like an employee, especially if you have a history of similar contracts or ongoing renewals. Usually, a minimum of 6 to 12 months of continuous work helps, but temporary contracts can be more challenging.

Eligibility criteria for contractor mortgages

Here are some of the key factors lenders will look at when assessing your eligibility for a mortgage as a UK contractor:

• Contracting history: Most lenders want to see that you’ve been working as a contractor for at least 6 to 12 months. A consistent track record of work, ideally in the same industry, helps prove reliability. Frequent or recent gaps in contracts may raise concerns unless you can clearly explain them.

• Type of contract work: The way you operate and earn income (whether through an umbrella company, your own limited company, as a sole trader, or under an agency, etc.) will influence how lenders assess your application. Some lenders are more familiar with one type of structure than another, which can impact your eligibility and how much you can borrow.

• Current contract length: Lenders will look at how long you have left on your current contract. Some will require at least 3 to 6 months remaining, while others may accept rolling contracts or multiple previous renewals as evidence of ongoing work. The more secure and stable your work appears, the more reassured lenders will be.

• Payslips, contracts, and documents: Depending on how you operate, you’ll need to provide relevant paperwork. Most lenders want to see recent payslips (if applicable), bank statements, and your current contract. Limited company contractors likely need to show company accounts and SA302s, while sole traders will typically be asked for at least 1 to 2 years of tax returns.

• Your deposit: Contractors are typically expected to put down a 10% deposit, resulting in a 90% loan-to-value (LTV) ratio. Some specialist lenders may accept a 95% LTV, particularly if your income is consistent. A larger deposit can increase your chances of approval and help you access better interest rates, but not always.

• Credit history: Your credit profile is a key part of any mortgage application. A clean credit file will make things smoother, but if you have missed payments, defaults, or other adverse credit, some lenders may still consider your application. The more severe or recent the bad credit, the more specialist the lender will need to be.

• Industry and stability: Contractors who work in sectors with high demand, such as IT, engineering, healthcare, or finance, may be viewed more favourably. If you’re new to contracting, lenders often take a more positive view if you’ve been in the same line of work for a while or moved directly from PAYE employment in the same field.

How much can you borrow?

Your affordability as a contractor will depend on the method a lender uses to calculate your income. These are the two main methods:

• Payslip-based: If you work under an umbrella company or get paid through PAYE, some lenders average your recent payslips (e.g. last 3 months) to determine your annual income.

• Contract-based: If you’re on a day rate, contractor-friendly lenders may calculate your income as your day rate multiplied by 5 (days/week) and then multiply that by 46 or 48 (weeks/year). This method can enhance your affordability compared to traditional pay slip-based calculations.

Once your annual income is established, most lenders will let you borrow around 4.5 times your salary. However, this may rise to 5 times, 5.5 times, or even 6 times your salary with a strong application. Use our calculator below to get an idea of what this will equate to:

How to get a contractor mortgage

If you’re applying for a contractor mortgage, comparing home loans and understanding each provider’s criteria can be overwhelming. Different banks and lenders assess contractor income in varying ways. Whether you’re using a day rate, payslips, or company accounts - it can all make an impact on lending decisions.

Speaking with an adviser who specialises in contractor mortgages can save you time, hassle, and potentially a lot of money. An expert mortgage broker will know which lenders are most flexible for your trading style and help you present your income in the best light to maximise how much you can borrow.

If you’d like a free, no-obligation chat with a broker who specialises in contractor mortgages made easy, you can get started here:

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Best banks and lenders for contractor mortgages

If you’re wondering which high street banks and mainstream lenders are open to offering mortgages for contractors, here are some examples of some popular options in the UK that may be open to certain types of contractors:

• Halifax: Considered a relatively contractor-friendly lender, contractors earning more than £500 per day or £75k per year, or working as an IT contractor, can be treated as employed. This means your income doesn’t need to be assessed using company accounts. You’ll typically need 12 months of continuous work and at least 6 months remaining on your current contract.

• Santander: As a high street bank, Santander tends to be more conservative with contractor mortgages. If self-employed, they’ll typically need 2 years of accounts, and they class working via an umbrella company as self-employed. Even as a PAYE contractor, they will want to see 2 years of P60s and the contract with the company you’re working for (not an umbrella company).

• Royal Bank of Scotland (RBS): RBS (and NatWest) are sometimes open to offering mortgages for agency workers and zero-hour contract workers, but you’ll need at least 12 months of contract evidence and a contract in place for at least another 3 months. They can offer more favourable treatment for high income contractors or those using a day rate.

If you want to know who offers a contractor mortgage tailored to your specific circumstances, it’s worth speaking with an adviser who can assess all your income streams and provide advice on the best bank or lender for your situation.

Mortgages for subcontractors

Subcontractors, particularly in industries such as construction, often face challenges due to income fluctuations. Most lenders will treat subcontractors as self-employed, requiring at least 12 months of tax returns or payslips, but this isn’t always the case.

Lenders familiar with the Construction Industry Scheme (CIS) may accept gross income from recent payslips, treating you as employed for mortgage application purposes, making it easier to get a mortgage with fewer documents.

Why choose Teito for your contractor mortgage?

Because contractor income can be complex, high street banks may not understand how to assess it correctly. That’s where the right broker can make all the difference. Our brokers specialise in securing mortgages for all types of contractors, whether you work through a limited company, an umbrella company, or as a sole trader.

We can introduce you to advisers who have extensive experience helping contractors secure mortgages with the best rates and terms. They know which lenders are most flexible, what documents you’ll need, and how to present your income in the most favourable way.

Here are a few more reasons why contractors choose us to help them get a mortgage:

• We specialise in contractor mortgages across all trading styles

• Your first chat is free, with no obligation to proceed further

• Our brokers are 5-star rated on leading review sites

• We can help maximise your affordability with exclusive deals

Ready to speak to a broker who specialises in mortgages for contractors? Get started here.