Contractor Mortgages

What is a contractor mortgage?

A contractor mortgage is a specialised home loan designed for individuals who work on a self-employed or freelance basis, often in fields such as IT, medical care, aviation, engineering, construction, or consulting. Those who work under the Construction Industry Scheme (CIS) are also eligible for a contractor mortgage.

Flexible borrowing for contractors

These borrowers typically don’t have a regular salary or traditional employment contracts, making it challenging for them to meet the standard requirements for a mortgage.

Contractor mortgages cater to this unique financial situation by considering a contractor’s income differently. Lenders may assess their eligibility based on contract earnings, daily rates, or the average of their annual income throughout multiple contracts.

This flexibility allows contractors to secure mortgages that align with their actual financial capacity.

Who could benefit from a contractor mortgage?

Contractors, freelancers, and self-employed professionals are the primary candidates. These individuals may include IT consultants, graphic designers, engineers, project managers, and tradespeople who work on short-term or project-based contracts.

While their income can be substantial, it is often irregular and can pose a challenge when trying to secure a conventional mortgage.

Contractor mortgages provide a viable solution for this demographic, enabling them to access the property market and fulfil their homeownership aspirations, even in the absence of a traditional employment structure.

Contractor mortgage applicants need to have a solid financial track record, demonstrate consistent contract work, and work with lenders who specialise in this type of mortgage to increase their chances of approval and favourable terms. Individuals with medical contracts – such as NHS or locum workers – often believe they are not eligible to get the lending. However, if the application is presented to the lenders correctly, it can be achievable.

Which mortgage lenders are considered contractor-friendly, and how do they differ from mainstream lenders?

Several lenders are known for being contractor-friendly, including Halifax, Nationwide, Clydesdale Bank, Metro Bank, and various building societies. These lenders differ from mainstream ones in how they view your income.

While some lenders usually look at your formal accounts, SA302 self-assessment forms, or dividends, some contractor lenders often use your day rate to calculate what you can afford. This approach can often significantly increase the amount you are able to borrow.