Can I get a contractor mortgage with no trading history?

Securing a mortgage as a contractor can often be challenging, especially if you are new to self-employment. Traditional high street banks prefer predictability, usually asking for two to three years of audited accounts or self-assessment tax returns (SA302s). This preference creates a significant hurdle if you have recently made the switch from permanent employment to contracting. However, the mortgage market, particularly in the UK, has adapted, and specialist lenders offer tailored products to address the specific financial structures of professional contractors.

Can I Get a Contractor Mortgage with No Trading History?

The short answer is yes, but it requires specific circumstances and the assistance of a specialist broker or lender. If you are a high-earning professional contractor, such as an IT consultant, engineer, or finance specialist, you may qualify under ‘day rate’ lending criteria, which effectively bypasses the requirement for extensive filed company accounts.

Understanding Contractor Mortgage Requirements

For most contractors, income assessment is complex because money is often taken out through a combination of salary and dividends, or retained within a limited company for tax efficiency. Traditional lenders struggle to underwrite risk based on these variable income streams.

Why Trading History is Important to Lenders

Lenders use your trading history to confirm two critical aspects: stability and affordability. A two-year history gives them confidence that your contracting career is sustainable and that the income generated can reliably cover mortgage repayments.

• Proof of Consistency: Demonstrates that you can secure contracts consistently without long gaps.
• Income Verification: Allows lenders to verify declared income against official HMRC documentation (SA302s and tax year overviews).
• Risk Assessment: Helps determine the stability of your business model and your sector.

The Standard Minimum Requirements

If you approach a mainstream lender, they will typically require:

1. A minimum of two years’ completed self-assessment returns (SA302s).
2. Evidence that your business model (e.g., limited company, umbrella company, or sole trader) is established.
3. A good personal credit history.

If you cannot meet these standards because you have no trading history, you must look toward the specialist mortgage market.

Pathways to Getting a Mortgage with Limited History

Specialist lenders recognise that many skilled professionals transition directly from long-term permanent employment into lucrative contracting roles, meaning their professional stability is high, even if their contracting history is short. These lenders use bespoke criteria to assess affordability.

Using Your Employment History (The Day Rate Model)

The most common pathway for securing a mortgage with limited history is by utilising the day rate calculation model. Instead of relying on filed accounts, specialist lenders calculate your annual income based on your current contract rate. This calculation usually involves:

• Taking your current daily rate (e.g., £500).
• Multiplying it by the standard working days per week (usually 5).
• Multiplying that weekly figure by a conservative number of working weeks per year (typically 46 to 48 weeks, allowing for holidays and short gaps between contracts).

For example, a contractor earning £500 per day assessed over 48 weeks would be underwritten based on an annual gross income of £120,000 (£500 x 5 days x 48 weeks). Crucially, the lender usually ignores how you extract this money (salary vs. dividends) for the purpose of affordability, making the process much simpler.

What If I’m Switching from Permanent Employment?

If you have recently terminated a long period of permanent employment to start contracting, you may be in the strongest position to secure a mortgage quickly, even with zero trading history, provided:

• Your new contract is already signed and ideally has at least three to six months remaining.
• The contract work is in the same field or industry as your previous permanent role, demonstrating continuity of skill.
• You have a good employment track record preceding the contracting start date.

In these cases, some lenders may approve applications after just one month of contracting, provided the day rate is confirmed via the contract and subsequent bank statements showing the initial payments.

Minimum Trading History Requirements

While “no trading history” is difficult, many specialist lenders will consider applications if you meet a minimum threshold, often:

• Minimum 3 Months Trading: This is sometimes possible if you use an umbrella company structure and can demonstrate consistent income via payslips.
• Minimum 6 Months Trading: This is a much more common and safer minimum period for limited company contractors, especially if you can provide initial company bank statements and copies of recent invoices.

Navigating the various criteria requires expertise. For further guidance on calculating and reporting self-employed income, the MoneyHelper website provides useful independent information on how lenders approach self-employed applicants in the UK.

The Role of Specialist Lenders and Brokers

If you are asking, “can i get a contractor mortgage with no trading history?” then engaging with a specialist mortgage broker is often the most effective route. These brokers have relationships with lenders who do not operate on the high street and who understand complex income streams.

A specialist lender is more likely to:

1. Use your current contract and day rate as the primary income measure.
2. Accept a shorter history (e.g., three to six months) if continuity of employment is proven.
3. Be flexible regarding retained profits within a limited company.

Essential Documentation Needed

To prepare for a successful application, even with limited trading history, you must compile comprehensive documentation to prove stability and income:

• Current Contract: A copy of your signed contract outlining the day rate, duration, and notice period.
• CV/Professional History: A detailed CV demonstrating continuous employment in the relevant sector for typically 2–3 years prior to contracting.
• Bank Statements: Personal and, if applicable, business bank statements showing income receipts and expenses, usually covering the last 3–6 months.
• Proof of Identity and Address: Standard requirements for any mortgage application.

Lenders will also conduct a thorough credit search to review your financial responsibility. Before submitting any application, understanding your credit profile 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)

Risk and Compliance Considerations

While specialised mortgages offer greater flexibility for contractors, it is crucial to approach the commitment responsibly. Contractor income, while high, can be variable if contracts are not renewed or gaps occur between roles. Always ensure that the mortgage repayments are affordable under varying circumstances.

When entering into any mortgage agreement, you are taking on a long-term financial commitment. Remember that your property may be at risk if repayments are not maintained. Defaulting on payments can lead to severe consequences, including legal action, repossession, increased interest rates, and additional charges. Always seek independent financial advice to ensure the product meets your needs and circumstances.

People also asked

How soon after starting my limited company can I apply for a mortgage?

While mainstream lenders typically require two years of filed accounts, specialised lenders may consider applications after just three to six months of trading, provided you can evidence a signed contract and demonstrate continuity of work history in the same sector.

Do I need a large deposit if I have no trading history?

Generally, having a larger deposit (e.g., 15% or 25%) can strengthen your application significantly when trading history is limited. A lower Loan-to-Value (LTV) ratio reduces the lender’s risk, making them more willing to overlook a short contracting history.

Are contractor mortgages more expensive than standard mortgages?

Contractor mortgages may sometimes carry slightly higher interest rates or fees than the lowest standard residential mortgages, particularly if you are borrowing high LTVs or have unusual circumstances. However, competition among specialist lenders means rates are often comparable to mainstream products, especially for high-earning applicants.

Can I use my personal savings as evidence of stability?

Yes. Lenders view significant personal savings or assets as a strong indicator of financial responsibility and stability. These funds provide a buffer against potential short-term gaps between contracts and can help mitigate the perceived risk associated with a lack of trading history.

What if I use an umbrella company instead of a limited company?

Contractors working via an umbrella company often find the mortgage application process slightly easier than those with limited companies. This is because your income is paid via PAYE (Pay As You Earn) and evidenced by payslips, which lenders treat similarly to standard employment income, simplifying the affordability calculation.

In conclusion, although the default position for most lenders is to require extensive trading history, being a professional contractor with a verified day rate provides access to a specific segment of the mortgage market. By focusing on specialist lenders and demonstrating clear continuity of professional experience, you significantly increase your chances of securing a mortgage even with limited time spent operating as a fully established business.