Introduction – Day Rate Contractor Mortgages
Securing a mortgage as a day rate contractor can present unique challenges compared to traditional employees. While there’s no specific ‘contractor mortgage,’ some lenders have criteria that is better for contractors who are paid on a daily rate.
By working with the right lenders and understanding how they assess income, contractors can secure a mortgage without restructuring their income model. In this guide, we’ll cover what you need to know about day rate contractor mortgages, how affordability is calculated, and how to improve your chances of approval.
Can I Get a Mortgage as a Day Rate Contractor?
Mortgages are available for day rate contractors. However, the key difference between lenders is how they calculate income, which in turn affects the maximum loan amount you can secure.
Is It Difficult to Get a Mortgage as a Contractor?
It can be—but the difficulty depends on the lender’s criteria. Each lender has different methods for assessing contractor income, which can result in varying loan amounts. While your application will still be subject to affordability assessments and credit checks like any other borrower, the lender’s approach to income calculation can significantly impact your mortgage offer.
What Mortgage Options Are Available for Contractors?
Day rate contractors have access to the same mortgage products as other borrowers, including:
- Fixed-rate mortgages
- Tracker mortgages
- Variable-rate mortgages
- Capital and interest repayment
- Interest-only mortgages (subject to criteria)
The main difference is how affordability is calculated, which determines the loan amount available to you.
How Long Do I Need to Be a Contractor to Get a Mortgage?
Lender requirements vary, but most prefer a track record of at least 6-12 months. Some lenders will consider day one contractors, while others require proof of continuous contracts with minimal gaps. Gaps in contracting can affect your application, with some lenders being more flexible than others.
How Is Affordability Assessed for a Limited Company Contractor?
If you operate through a limited company, lenders may assess your affordability in several ways:
- Using your day rate
- Assessing salary and dividends
- Including director’s salary plus retained profits
Selecting a lender that assesses income in a way that maximises your borrowing potential is crucial.
How Is Affordability Assessed for a Contractor on a Day Rate?
Most lenders calculate contractor income as follows:
- Day rate × 5 (weekly earnings)
- Weekly earnings × 46 to 48 weeks (to allow for annual leave)
This annualised figure is then used to determine affordability and the maximum loan amount available.
What Documents Does a Contractor Need for a Mortgage?
Contractors will need to provide standard documents such as:
- Proof of ID and address
- Credit score check
- 3-12 months of bank statements (varies by lender)
In addition, contractors must provide:
- A copy of their latest contract (showing the day rate)
- Payslips (if using an umbrella company)
- 1-3 years’ tax returns and accounts (if using limited company earnings)
Lender requirements vary, so working with a specialist mortgage adviser can help ensure you meet the necessary criteria.
Day Rate Contractor Mortgages – Summary
Although some lenders have contractor-friendly criteria, mortgage affordability can vary significantly depending on the lender’s approach.
By working with the right lender and structuring your application correctly, you can secure the mortgage you need without changing how you get paid.
Seeking the right advice will help you to maximise your borrowing potential and find the right deal.
