If you’re a contract worker or a temporary worker, you may be refused a mortgage despite being able to afford the repayments.
In the past, self-certification mortgages were an option, which meant borrowers just told lenders how much they earned without having to provide proof in the form of bank statements or recent payslips. These were banned due to applicants abusing the system and lying to get a mortgage.
Now, it’s much tougher.
Why is it so tough to get a mortgage as a contract worker?
Simply put, as a contract worker, you won’t have a permanent job. Your contract will be for a set period, or could end at any time depending on the needs of the employer, which presents a huge risk for the lender as, without a job, you may be unable to keep up with your mortgage repayments.
On the other hand, you may be self-employed which could mean a varied income from month-to-month.
Mortgages for contract workers
If you’re on a fixed term contract, lenders usually require you to have at least 6 months contracting history, with 6 months remaining on your current contract.
If your contract has been extended at least once, then lenders see this as a good sign you have a stable income and are more likely to approve your application.
If you’re a professional contractor, such as an accountant, you should be able to apply for a mortgage with proof of your service history and daily rates.
Mortgages for self-employed
If you are self-employed, at least 12 month’s work history is required, and then lenders will look at the figures you declare to HMRC.
If you are a sole trader or partnership, then lenders will go off your net profit.
If you are a ltd company director, they will go off your salary plus dividend.
How much can I borrow?
As with regular mortgages, every lender has a different way of working out the maximum amount any given client can borrow.
Usually, if you’re on a employer’s contract, they will look at your gross basic salary plus any overtime or bonuses.
If you’re self employed, lenders will calculate your income by multiplying your day rate by the number of days you work per week, and then multiplying that by 48 weeks. You can then times that by four or five to figure out your borrowing limit.
For advice on getting a mortgage if you’re a contract worker or a self-employed worker, speak to one of our expert advisers who will be able to help you with the next steps.