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Navigating the mortgage market can be tricky for contractors, but it’s not impossible. If you’re working on a contract basis, whether as a freelancer, self-employed professional, or limited company director, understanding the ins and outs of contractor mortgages is crucial to getting a good deal. Let’s dive into what you need to know in 2024.
A contractor mortgage is designed for individuals who work on a contract rather than a permanent employment basis. Lenders view contractors differently from traditional employees because their income can be more variable and less predictable. This doesn’t mean you’re at a disadvantage; it just means you need to be strategic in how you present your financial situation.
Most lenders offering contractor friendly mortgages understand the nuances of contracting, such as how your income might fluctuate or how you may have gaps between contracts. These lenders focus on the overall strength of your contracting history and your ability to maintain consistent income, rather than just a single salary figure.
Using a contractor mortgage calculator can help you estimate how much you might be able to borrow based on your contract rate and other financial details. These calculators typically ask for your daily or weekly contract rate, the length of your contracts, and the number of years you’ve been contracting. By inputting these details, you can get an estimate of your potential mortgage amount and monthly repayments.
Use this calculator to determine how much you could potentially borrow for a mortgage, based on the typical salary multiples used by most UK lenders.
Your Results:
You could borrow up to
Most lenders would consider letting you borrow
This is based on 4.5 times your household income, the standard calculation used by the majority of mortgage providers. To borrow more than this, you will need to use a mortgage broker to access specialist lenders.
Some lenders would consider letting you borrow
This is based on 4.75 times your household income, a salary multiple you might struggle to qualify for without the help of a broker. This income multiple is not widely available to customers who are applying directly with a lender.
A minority of lenders would consider letting you borrow
This is based on 5.5 times your household income, a salary multiple you will struggle to get without a broker. 5.5 times salary mortgages are usually only available under very specific circumstances.
Get Started with an expert broker to find out exactly how much you could borrow.
Get StartedWorking with a contractor mortgage broker can be extremely beneficial. These specialists understand the nuances of contracting and how lenders view your income. Here’s why you might consider using a broker:
The amount you can borrow with a contractor mortgage typically depends on your contract rate. Lenders will often calculate your potential loan amount based on your daily rate multiplied by the number of working days in the year. For example:
Annual Income = Daily Rate × Working Days
So, if your daily rate is £350 and you work 230 days a year, your annual income would be:
£350 × 230 = £80,500
Lenders then use this figure to assess how much they’re willing to lend, usually between three and five times your annual income. However, this can vary based on other factors like your credit score, the size of your deposit, and your overall financial profile.
Based on a mortgage of £300,000 at 75% LTV and 25 years Today’s best buy mortgages
Latest mortgage best buys
See all mortgage best buysSpeak with Us Interest Rate Mortgage Type Monthly Repayment Amount Total Fees Max LTV 3.99% Fixed £1,192 £1,295 75% 4.01% Fixed £1,196 £1,516 75% 4.03% Fixed £1,197 £1,014 75% 4.11% Fixed £1,207 £1,025 75%
When applying for mortgages for contractors, you’ll need to provide various documents to prove your income and financial stability. These might include:
Keeping up-to-date with the latest news and changes in the mortgage market is crucial for contractors. In 2024, we anticipate that new mortgage rules for self-employed individuals, including contractors, may continue to evolve. Changes in the economy, interest rates, and lending criteria can all impact your mortgage options.
For the latest advice, it’s worth regularly consulting with a contractor mortgage broker or financial advisor who specialises in contractor finances. They can provide the most current information on available mortgage products, help you understand how changes might affect you, and ensure you’re always in the best position to secure a competitive mortgage deal.
Getting a mortgage as a contractor doesn’t have to be a daunting process. With the right preparation, documentation, and support from Ascot Mortgages and our contractor mortgage specialist, you can secure a mortgage that suits your unique financial situation. Whether you’re looking to buy your first home, remortgage, or invest in a property, understanding the options available to you and how to present your income to lenders is key to success.
As 2024 unfolds, staying informed and proactive will help you navigate any changes in the market and find the contractor friendly mortgage that best meets your needs.
Get things moving, apply for a remortgage.
Free unbiased mortgage advice is just a phone call away.
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Legal
Ascot Mortgages authorised and regulated by the Financial Conduct Authority and can be found on the FCA register (www.fca.org.uk) under reference 776062. The FCA do not regulate some forms of mortgages. The guidance and advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. There may be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate it will be £599 per mortgage account. Ascot Mortgages Ltd give you the option to pay a non-refundable fee of £1299 payable with the application. If this option is taken, Ascot Mortgages Ltd will refund any procuration fee received by the lender.
Ascot Mortgages Limited is registered in England and Wales and have their registered office at 8 Webster Court, Westbrook, Warrington, WA5 8WD. The company’s registration number is 06764971.
We are a credit broker, not a lender. We work with the whole of the lending market. We may receive commissions that will vary depending on the lender, product, or other permissible factors. The nature any commissions model will be confirmed to you before you proceed.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY DEBT SECURED ON IT
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