Are there special remortgage deals for contractors?

While there are no specific product categories called “Contractor Remortgage Deals,” many specialist lenders and mainstream lenders with flexible criteria offer tailored solutions designed to assess income based on day rates rather than relying solely on traditional employment records. Contractors must prepare detailed financial evidence, including contract history and business accounts, to prove long-term affordability.

Are There Special Remortgage Deals for Contractors?

The short answer is yes, special approaches and specific criteria exist that effectively function as ‘special deals’ for contractors. Contracting professionals, whether operating as sole traders, through limited companies, or simply on fixed-term contracts, often face unique challenges when applying for a standard remortgage in the UK.

Standard mortgage lenders typically prefer applicants with predictable income streams evidenced by P60s, consistent payslips, and long-term employment records. Contractors, whose income may fluctuate or who are employed on short-term contracts, do not fit this traditional model. This is where specialist lending solutions come into play.

Why Contractors Need Specialist Underwriting

The core challenge for contractors is proving stability and consistency of income. Most lenders use strict algorithms to assess affordability, and if your payslips vary or you change contracts frequently, the lender may deem your income “unverifiable” or “unstable.”

Specialist lenders, however, have evolved their underwriting processes to recognise the stability inherent in certain contracting roles—even if the contract duration itself is short. They understand that a highly skilled IT professional or engineer, for instance, rarely experiences long periods without work.

The Two Main Specialist Approaches for Contractors

The assessment method chosen by the lender often defines whether you can secure a competitive remortgage deal:

• 1. Day Rate Calculation (The Preferred Method): For contractors paid a set daily rate, many specialist lenders will calculate your annual income by taking your day rate and multiplying it by the typical working days in a year, minus holidays and potential downtime. A common formula is: Day Rate x 5 days x 46 weeks. This approach provides a high income figure that reflects your professional earnings potential, rather than relying solely on previous tax returns which may show lower declared income for tax purposes.
• 2. Retained Profits Assessment: If you contract through a Limited Company, standard lenders often only look at the salary you draw plus dividends. Specialist lenders, however, may consider the company’s retained profits as part of your available income, provided they are satisfied that the funds are accessible and sustainable.

Using these specialist assessment criteria means that you can often borrow more, or qualify for the same competitive rates as permanently employed individuals, provided you meet other eligibility requirements.

Eligibility Criteria for Contractor Remortgage Deals

Lenders offering contractor-friendly terms typically have specific requirements regarding your contracting history. These requirements help them establish the necessary confidence that your income is robust and continuous.

Required Contracting History

Most specialist lenders will require evidence of continuous contracting history:

• Minimum Length of Service: Generally, you need to have been contracting for a minimum of 6 to 12 months, and in some cases, up to 2 years, depending on the complexity of your role.
• Contract Continuity: Lenders prefer to see that you have renewed contracts frequently or moved between relevant contracts with minimal gaps (typically no more than 6 weeks between roles).
• Future Contract Visibility: If your current contract is nearing its end, having confirmation of an extension or a signed contract for your next role can significantly strengthen your application.

Essential Documentation

Documentation is key when proving affordability as a contractor. Be prepared to provide the following items when applying for a remortgage:

• Signed copies of your current and previous contracts (usually covering the last 12–24 months).
• Bank statements showing regular receipt of payments matching the contract rates.
• Proof of identity and address (as standard).
• If operating via a limited company: up to two years of audited company accounts, confirmation of dividends and salary drawn, and possibly SA302 forms (tax calculations) from HMRC if your income assessment relies on self-employment structure.

Ensuring all documentation is readily available and clearly demonstrates your day rate and continuous employment status will streamline the application process significantly.

Improving Your Remortgage Application as a Contractor

Securing the best remortgage deals often comes down to demonstrating financial health beyond just your income stream. Lenders review several factors that can affect the rate you are offered and the amount you can borrow.

Maintain a Strong Credit History

Your credit score is crucial. Any defaults, County Court Judgements (CCJs), or missed payments can severely restrict your access to the best rates, even with high contractor income. Before applying, review your credit report for errors and ensure all existing credit accounts are managed responsibly.

Understanding your current credit position is the first step toward 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)

Manage Debt and Affordability

Lenders assess affordability by weighing your income against your existing financial commitments (loans, credit cards, maintenance payments). Reducing unnecessary debt before applying for a remortgage can significantly increase the perceived affordability of the new mortgage payments.

For additional guidance on managing debt and preparing your finances for a major commitment like a mortgage, you can consult resources such as the UK Government-backed MoneyHelper service.

Reduce Your Loan-to-Value (LTV)

The Loan-to-Value ratio (LTV) is the percentage of the property value you are borrowing. Lowering your LTV (e.g., aiming for 75% or 60% LTV instead of 90%) often unlocks lower interest rates, as lenders perceive less risk. If you have equity built up in your property, using it to reduce the amount you need to remortgage could secure a more favourable deal.

The Value of a Specialist Mortgage Broker

For contractors, navigating the remortgage market without expert guidance can be challenging. A mortgage broker who specialises in contractor finance is highly recommended because:

• They understand the specific underwriting criteria of niche lenders.
• They know exactly which lenders accept income calculation based on annualised day rates.
• They can present your complex income structure to underwriters in the most favourable light, often bypassing automated decision systems that might reject contractor applications prematurely.
• They save you time by filtering out mainstream lenders who will apply traditional, restrictive affordability checks.

Using a specialist broker increases the likelihood of securing the most competitive interest rates available to you based on your professional background.

Compliance and Financial Risk Warning

Remortgaging is a significant financial decision. While specialist deals can provide access to funds and better rates, it is crucial to understand the commitment and risks involved.

When securing a remortgage, whether standard or specialist, you are taking on a long-term loan secured against your property. Failure to maintain repayments has serious consequences, including legal action, repossession, and increased interest rates or additional charges. Your property may be at risk if repayments are not made. Ensure that any mortgage you take on is affordable not just now, but also in the event of potential changes to interest rates or periods of reduced contracting work.

People also asked

How long do I need to be contracting before I can remortgage?

Most contractor-friendly lenders prefer a minimum of 12 months of continuous contracting history, although some may consider applicants with as little as 6 months if they have substantial prior industry experience and a high day rate.

Can I remortgage if I have recently set up a limited company?

Yes, but it is more difficult. If the limited company is newly established, lenders may require evidence of profitability and a robust business plan, or they might assess your income based on previous self-employment history if available.

Will gaps between contracts affect my remortgage application?

Minor gaps (typically less than six weeks) are usually acceptable, as specialist lenders understand contract downtime is normal. However, long or frequent gaps exceeding eight weeks may lead underwriters to question the stability of your future income, potentially restricting your borrowing options.

Do I need an accountant to apply for a contractor remortgage?

While you don’t legally need one, using a qualified accountant who can accurately produce annual accounts, company tax returns, and SA302 forms is highly beneficial, especially if the lender needs to assess retained profits or complex income structures.

Are the interest rates for contractor remortgages higher than standard rates?

Not necessarily. Once a specialist lender is satisfied with the stability and affordability of your income, you should be able to access highly competitive rates, often matching the best deals available on the high street. However, if your circumstances are particularly niche or complex, you might initially access rates from more specialist providers which could carry a slight premium.

In summary, while the market does not advertise “Contractor Remortgage Deals” as a distinct product class, the availability of flexible underwriting criteria from specialist lenders means that contractors have genuine access to remortgaging options that accurately reflect their earning power and stability. Preparation, detailed documentation, and working with an expert broker are the keys to a successful and cost-effective remortgage process.