Best contractor mortgage deals

What is a contractor mortgage?

A contractor mortgage is a standard mortgage that’s tailored to people who work on short-term contracts, freelance jobs, or through their own limited company.

Instead of needing two or three years of accounts, some lenders will use your current contract to work out how much you can borrow.

Let’s say you earn £400 a day and work five days a week. A lender might calculate your income as £400 x 5 x 48 weeks = £96,000 annual income. This could give you access to better rates and a higher loan amount than using your tax return alone.

Why choose a contractor mortgage?

Contractor mortgages can make life easier if you:

• Work through a limited company or umbrella company
• Take short-term contracts rather than permanent roles
• Don’t have years of accounts or tax returns to show

With the right lender, you could:

• Borrow based on your current or recent contract
• Access the same rates as permanent employees
• Get a mortgage even with gaps between contracts

You might also be able to apply soon after switching to contract work, depending on your experience and industry.

How contractor mortgages work

Lenders like to see stability of income to give them confidence that you'll be able to make your mortgage payments. For contractors some work contracts might only last for a few weeks or months at a time, making lenders nervous about how you'd meet your mortgage payments when the contract winds up.

Some lenders will work out what you can borrow based on your day rate or contract value. Others might want to see full accounts or several months of payslips.

It helps to work with a broker who understands contractor mortgages and knows which lenders are most flexible.

You’ll usually be able to choose between:

• Fixed rate mortgages – your payments stay the same for a set period
• Variable rate mortgages – your payments can go up or down
• Repayment or interest-only options

Who can get a contractor mortgage?

You’ll need to pass the usual affordability checks, and each lender has different rules. Some will accept:

• Contractors with at least 6 months' experience
• Gaps of up to 6–8 weeks between contracts
• Day rate or contract income instead of accounts

To apply, you’ll usually need:

• A copy of your current and previous contracts
• Proof of ID and address
• Recent bank statements
• A good credit history

If you work through a limited company, some lenders may still prefer to look at your salary and dividends. Others will accept your contract rate if you’ve been working that way for a while.

You may also be eligible for better contractor mortgage rates if you’re making a joint application with someone who is permanently employed. The earnings of both people will be taken into account, but a stable income from your joint applicant may help to secure you a better rate.

What if you’re a first-time contractor?

Some lenders will still consider you, especially if you’ve recently switched from permanent employment in the same industry.

You’ll need to show that you’ve got a current contract in place and can afford the repayments. Having a deposit of at least 10%–15% will also help improve your chances of getting a good rate.

How to find the best contractor mortgage deals

The process for securing a contractor mortgage is the same as for any other type of mortgage. The first step is to speak to a contractor mortgage broker to find out what deals are available to you and which lenders are most likely to offer you a mortgage based on your personal circumstances.

Then, you can go ahead and apply for your mortgage in the normal manner. We’ll guide you through the whole process, supporting you with any questions you might have. If you’re looking for a contractor Buy to Let mortgage, you’ll find fewer lenders who are willing to offer this, so going through a broker like L&C may be the only way to access this type of deal.

At L&C, we compare mortgages from across the market, including deals designed for contractors, freelancers and the self-employed.

Once we’ve found a deal that suits you, we’ll handle the application and keep everything moving smoothly, from start to finish.

Making repayments on a contractor mortgage

Your monthly repayments will depend on:

• How much you borrow
• The interest rate on your mortgage
• Whether you choose repayment or interest-only

Most contractors choose a fixed rate mortgage to keep their payments predictable especially if their income varies month to month.

If your circumstances change later on, you can always remortgage or switch to a new deal.