Are there special grants for contractors buying homes?

Buying property as a self-employed contractor in the UK can present unique challenges, particularly regarding mortgage approval due to varying income streams. While the desire for specific, dedicated financial assistance is understandable, the simple answer to whether are there special grants for contractors buying homes is generally no. Contractors do not have exclusive access to UK government grants. Instead, they must utilise the standard housing schemes and financial incentives available to all UK citizens, often focusing on specialist mortgages to overcome lending barriers.

Are there special grants for contractors buying homes?

The UK government offers various schemes intended to help UK residents purchase property, particularly first-time buyers. However, these schemes are typically structured based on property value, buyer status (first-time buyer, existing homeowner), or income level, rather than specific employment categories like contracting or self-employment.

Contractors, generally defined as self-employed individuals operating via limited companies or umbrella companies, primarily face challenges with standard mortgage lenders who prefer stable, PAYE income. While there are no special grants to alleviate the costs of the property purchase itself, understanding the available national schemes is crucial.

Understanding Grants vs. Schemes

It is important to differentiate between a “grant” and a “scheme.”

• Grants: These are usually non-repayable sums of money given for specific purposes, often localised or highly targeted (e.g., energy efficiency grants). Currently, there are no national property grants aimed solely at contractors.
• Schemes: These are government-backed initiatives that assist with property purchases, typically via equity loans, deposit savings bonuses, or shared ownership models. These are available to contractors, provided they meet the standard eligibility criteria.

Government Schemes Available to Contractors

As a contractor, you are eligible for the same support mechanisms that all other eligible UK buyers can access. The most commonly used schemes include:

1. Lifetime ISA (LISA)

The Lifetime ISA (LISA) is a popular way for UK residents aged 18 to 39 to save for their first home or retirement. The government adds a 25% bonus to your savings, up to a maximum of £1,000 per tax year. Since the contribution limit is £4,000 per year, this means a potential maximum bonus of £32,000 over the lifetime of the ISA.

• You must be a first-time buyer.
• The property must be bought for under £450,000.
• If you withdraw the money for any reason other than buying a first home or retirement (and outside of specific exceptions), you will pay a withdrawal charge.

For detailed information on saving for a property using government schemes, you can consult MoneyHelper’s guide to government help for home buyers.

2. Shared Ownership

Shared Ownership schemes allow buyers to purchase a percentage share (usually between 10% and 75%) of a home from a housing association and pay rent on the remaining share. This dramatically reduces the deposit and mortgage amount required initially, making property ownership more accessible.

Contractors, like other self-employed individuals, are fully eligible for Shared Ownership, provided their income meets the affordability checks required by the housing association and the mortgage lender.

3. First Homes Scheme

The First Homes scheme offers eligible first-time buyers the opportunity to purchase a new build property at a discount of at least 30% off the market price. The discount is locked in perpetuity, meaning the home must always be sold to another eligible first-time buyer at the same percentage discount. Eligibility is often restricted to local people or key workers, but contractors meeting these local criteria may apply.

Overcoming the Contractor Mortgage Hurdle

While grants are scarce, the major difficulty for contractors is often securing the loan itself. Traditional lenders often struggle to assess contract income, viewing it as less reliable than PAYE employment.

Specialist lenders, however, have developed flexible criteria for contractors. These “contractor mortgages” often rely on your daily or hourly rate to calculate your affordability, rather than just the salary and dividends you draw from your limited company. This specialist approach is often the real solution needed by contractors.

Preparing for a Specialist Contractor Mortgage

To ensure a smooth application process, contractors typically need:

• Evidence of your contract history (often 12 to 24 months).
• A copy of your current contract showing the day rate.
• Proof that your contract has sufficient time remaining, or a history of renewals.
• Clean credit history.

Before approaching lenders, understanding your current financial standing is vital. 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)

People also asked

Are self-employed buyers treated differently for mortgages?

Yes, self-employed buyers, including contractors, are often subject to stricter affordability checks by mainstream lenders. Lenders typically require two to three years of certified accounts or SA302 forms to prove income stability. Specialist contractor mortgage providers, however, are more flexible, often using a daily contract rate to calculate loan capacity.

Can contractors get Help to Buy Equity Loans?

While the original Help to Buy Equity Loan scheme in England closed to new applications in October 2022, equivalent schemes may exist in Scotland and Wales. If a contractor meets the regional eligibility criteria (e.g., being a first-time buyer or buying a new build within specific limits), their contractor status does not automatically exclude them.

What is the minimum deposit required for a contractor mortgage?

The minimum deposit required for a contractor mortgage is generally 10% of the property value, aligning with standard industry practice. However, putting down a larger deposit (15% or more) can significantly improve your choice of lenders and reduce the interest rate offered, as it lowers the lender’s perceived risk.

Do I need an umbrella company or a limited company to qualify for a contractor mortgage?

Lenders are flexible; you can typically apply for a specialist contractor mortgage whether you operate via an umbrella company (where you are technically an employee) or your own limited company. The key is proving the continuity and sustainability of your contract income, regardless of the structure used for payment.

Are there local authority grants available for contractors?

While there are no national grants specifically for contractors, local authorities occasionally offer localised incentives, such as grants or discounted sales on specific plots, often aimed at promoting local housing development or assisting key workers in the area. Contractors should check their specific local council’s website for any regional affordable housing initiatives.

Summary of Contractor Support

While the search for a specific “contractor grant” is likely to yield disappointment, contractors should focus their efforts on two main areas:

1. Maximising Existing Schemes: Utilise available deposit-boosting schemes like the Lifetime ISA, and explore Shared Ownership if deposit size is a barrier.
2. Securing Specialist Finance: Partner with a mortgage broker experienced in contractor and self-employed lending. They can match your unique income structure to specialist lenders who assess affordability based on your day rate, bypassing the limitations of traditional high-street banks.

By focusing on robust documentation and accessing the right specialist lending channels, contractors can successfully navigate the UK property market.