Contractor mortgages based on your day rate

Contractors often earn more than many salaried employees and yet find it harder to borrow. The reason is usually structure. If you work through your own limited company, your accounts and tax returns are shaped by how you choose to pay yourself, and they may show far less than your contract is worth. If you work through an umbrella company, your payslips can look irregular. And if you are on a fixed term contract, a lender may worry about what happens when it ends.

None of this means a mortgage is out of reach. It means the right lender, and the right presentation, matter more than usual.

How lenders assess contractor income

There are two main approaches, and the difference between them can be significant.

Day rate, annualised

Some lenders assess you on your current contract rather than your accounts. They take your day rate, multiply it by a set number of days a week and weeks a year, and use that as your income. The number of weeks varies by lender, which is one reason the same contract can support different amounts with different lenders. This approach suits contractors whose company structure understates what they earn.

Accounts or tax returns

Other lenders treat a limited company contractor in the same way as any company director, using salary and dividends or a share of the company's profit, usually over two years. If you have been contracting for some time and draw a good share of what you bill, this may work well. If you keep profit in the company, the day rate route is often more helpful. Our page on mortgages for company directors explains the accounts based approach in more detail.

Types of contractor we help

• Limited company contractors in IT, engineering, finance, project management, consultancy and similar fields.
• Umbrella company contractors, where some lenders use your day rate and others use your payslips.
• Fixed term contract workers employed on payroll for a defined period, where some lenders will look at your contract and history rather than requiring a permanent role.
• Locums and interim professionals working through agencies or on rolling assignments.

What lenders check beyond the rate

The day rate is only part of it. Underwriters will usually look at:

• Contracting history. Many lenders look for around a year, and some accept less if you moved into contracting from employed work in the same field.
• Time left on the current contract, and your record of renewals or new contracts.
• Gaps between contracts. Short breaks are normal. Longer ones may need explaining.
• Consistency of work. Moving between contracts in the same field is usually viewed well.

Any figure a lender works out is subject to underwriting and valuation, and will also take account of your outgoings and commitments. If you are looking at a property to let rather than live in, our buy to let mortgages page explains how those lenders assess rent.

What you'll usually need

• Your current contract and any renewals or extensions
• Your CV or a summary of your contracting history
• Recent bank statements showing contract income
• Payslips, if you work through an umbrella or agency payroll
• Accounts or SA302s and tax year overviews, if a lender asks for them

How we work with contractors

1. A proper conversation. 30 to 45 minutes on your contract, your history and what you want to buy or remortgage.
2. Your documents, once. Uploaded through our secure portal against a checklist built for contractor income.
3. Research the market. We compare day rate and accounts based lenders and shortlist the ones that fit.
4. Decision in principle. Obtained so you can make offers with confidence, subject to underwriting and valuation.
5. Full application. We package your contract and history for the underwriter and deal with their questions.
6. Offer to completion. We keep the lender and your solicitor moving, and review your protection, which matters more when you have no employer sick pay.

The first consultation is free. We advise contractors across the UK by phone and video, so send us a few details and we will aim to come back to you within the hour during office hours.