Can I get a mortgage with a zero-hour contract?

Navigating the mortgage market when you are employed on a zero-hour contract can feel complex, but it is certainly achievable. While mainstream lenders often prefer consistent, predictable income streams from standard permanent employment, many UK lenders now recognise the increasing prevalence of flexible working arrangements. The key to success lies in demonstrating long-term stability, consistency of earnings, and overall affordability. This article will break down how lenders assess zero-hour contracts, what documentation you need, and the steps you can take to significantly strengthen your mortgage application.

Can I Get a Mortgage with a Zero-Hour Contract?

Yes, you can potentially get a mortgage if you are employed on a zero-hour contract, but the application process is generally more rigorous than for applicants with fixed salaries. Lenders are primarily concerned with two factors: risk and affordability. Since zero-hour contracts do not guarantee a minimum number of hours, the perceived risk of income fluctuation or job loss is higher.

To mitigate this risk, mortgage providers need robust evidence that your income is stable, sustainable, and sufficient to cover the mortgage repayments, even if your hours vary slightly month-to-month. This usually means demonstrating a significant track record of employment with consistent earning figures.

Understanding the Lender’s Perspective

When assessing a zero-hour contract application, lenders move away from simply calculating an annual salary. Instead, they treat your income similarly to self-employment, focusing on historical averages and the underlying stability of your employer.

The Challenge of Consistency

The main challenge is proving consistency. Lenders use historical data to project your future income. If your earnings are erratic—high one month, low the next—it makes projecting future affordability difficult and risky for the lender. They want to see:

• A long employment history, ideally with the same employer.
• A stable average monthly or annual income over the assessment period.
• Proof that the work is not temporary or seasonal.

Affordability Calculations for Zero-Hour Contracts

Most lenders will calculate your average monthly or annual income over a set period. Common assessment periods are:

• 12 months: This is a typical minimum requirement for many lenders.
• 24 months: Specialist lenders or those seeking higher security may request two full years of earnings data.

The lender will typically calculate the total amount earned during that period and divide it by the number of months. They may then use 90% or 95% of that average figure for their affordability calculation, applying a small safety margin due to the inherent uncertainty of zero-hour work.

Key Criteria for Securing a Zero-Hour Contract Mortgage

While specific requirements vary between providers, there are several standard criteria that will significantly affect your chances of approval when applying for a mortgage with a zero-hour contract.

1. Length of Employment History

To demonstrate reliability, you must show you have been working consistently. A minimum of 12 months in the same role is often required, but 18–24 months is highly preferred. The longer the track record of consistent income, the more comfortable the lender will be.

2. Deposit Size

Having a larger deposit acts as a significant risk mitigator for lenders. If you are only able to afford a 5% deposit (requiring a 95% Loan-to-Value or LTV), you may struggle. However, if you can offer a 15% or 20% deposit (LTVs of 85% or 80%), you open up access to a wider range of competitive products, as the lender’s exposure is reduced.

3. Credit Profile

A strong credit history is vital, regardless of your employment type. Lenders scrutinise your payment habits and existing debts. Any history of CCJs (County Court Judgments), defaults, or late payments will raise concerns about your ability to manage debt, particularly given your flexible income structure. Before applying, it is highly recommended to check your credit report to identify any errors or areas for improvement. Get your free credit search here. It’s free for 30 days and costs £14.99 per month thereafter if you don’t cancel it. You can cancel at anytime. (Ad)

Essential Documentation Required

If you are applying for a mortgage with a zero-hour contract, prepare to provide extensive evidence of your earnings. Standard requirements typically include:

• P60s: Your P60 forms covering the last two tax years, which officially document your total earnings for those periods.
• Payslips: Usually the most recent 6 to 12 months of payslips, demonstrating regular payments and deductions.
• Bank Statements: Personal bank statements (often 6 months) to corroborate the income shown on the payslips and demonstrate responsible financial conduct.
• Employment Letter: A letter from your employer confirming your ongoing employment status, confirming you are on a zero-hour contract, outlining the duration of your contract, and confirming your typical hourly rate. This letter is crucial for establishing stability.
• SA302s/Tax Overviews: If your zero-hour contract income is combined with other sources of income, or if you are deemed self-employed by HMRC, you may need these tax documents.

Ensure all documentation is clearly organised and readily available, as lenders will need to verify every aspect of your stated income.

Tips for Strengthening Your Application

Since your employment status already presents a hurdle, focusing on areas you can control can significantly enhance your appeal to lenders:

Reduce Existing Debt

Lenders calculate your Debt-to-Income (DTI) ratio. High levels of unsecured debt (credit cards, personal loans) reduce the amount you are deemed able to borrow for a mortgage. Reducing these balances before applying will improve your affordability metrics and DTI.

Manage Your Financial Commitments

Ensure you have no recent missed payments or unauthorised overdraft usage. Show that you manage your money effectively and consistently pay bills on time. Affordability is not just about income; it is also about expenditure control.

Seek Specialist Advice

The mortgage market is vast, and many high-street banks operate rigid algorithms that may automatically reject zero-hour contract applicants. However, building societies and specialist lenders often take a more flexible, manual approach to underwriting. They assess each case on its merits rather than relying solely on automated scoring.

A specialist mortgage broker can be invaluable here. They have in-depth knowledge of which lenders are currently most accommodating to zero-hour workers, saving you time and preventing multiple credit searches which could harm your credit profile.

Finding Support and Information

It is important to understand your rights regarding employment and finance. The government provides useful resources on flexible working arrangements and accessing financial advice. For impartial guidance on mortgages, affordability, and the application process in the UK, you can consult MoneyHelper, a service backed by the UK government.

People also asked

Do all lenders treat zero-hour contracts the same way?

No, treatment varies significantly. High street lenders typically require two years of consistent income history and may only use 50% or 75% of the average earnings, while specialist lenders and building societies may be more flexible, accepting 12 months of history and using 100% of the calculated average, provided the employment is stable and ongoing.

Can I use benefits or commission alongside my zero-hour income?

Yes, supplementary income such as regular commission, certain tax credits, or guaranteed benefits may be considered, but only if they are demonstrably reliable and likely to continue for the duration of the mortgage. Lenders will often apply stricter scrutiny and lower percentages to these auxiliary income streams.

Does the type of work matter if I am on a zero-hour contract?

Yes. If your zero-hour contract is within a sector known for high demand and stability (such as NHS nursing, education, or essential utilities), a lender is likely to view your application more favourably than if the contract were in a highly seasonal or economically sensitive industry.

What if I have recently switched from full-time to a zero-hour contract?

If the switch was recent (e.g., within the last six months), many lenders will pause your application until you have built up a sufficient track record (typically 12 months) under the new arrangement. They need historical data that accurately reflects your current, flexible earning capacity.

Will I need a larger deposit for a zero-hour contract mortgage?

While not strictly mandatory, having a larger deposit (15% or more) is highly recommended. A higher deposit lowers the lender’s risk exposure (LTV), making them more willing to accept the perceived risk associated with irregular income streams, thereby improving your chances of securing favourable rates.

Working with a Specialist Mortgage Broker

For individuals with non-standard employment like zero-hour contracts, the journey often starts and ends with a broker. A specialist broker understands which specific products are designed for flexible workers and can package your application in the most persuasive way, highlighting your income stability rather than focusing solely on the lack of guaranteed hours.

They can help you navigate the complex underwriting requirements, ensuring you only apply to lenders who are genuinely likely to approve your specific situation, preventing unnecessary rejections and protecting your credit score.

Conclusion

Obtaining a mortgage while on a zero-hour contract is a realistic goal, provided you can present a strong, consistent financial history. Lenders need proof of reliable earning stability over the past 12 to 24 months, supported by meticulous documentation. By maximising your deposit, optimising your credit score, reducing existing debt, and engaging the services of a specialist financial advisor, you significantly increase your opportunity to successfully secure the necessary property financing.

Remember that all mortgage agreements are substantial financial commitments. If you take out a mortgage, your property may be at risk if repayments are not made. Ensure you fully understand the terms, including interest rates and repayment schedules, before committing.