Can I get a mortgage if I have a rolling contract?

Rolling contracts introduce a degree of income uncertainty, making standard residential mortgage applications more complex than those based on permanent employment. While major high-street lenders may initially hesitate, it is absolutely possible to secure a mortgage by demonstrating a strong, continuous history of work, usually covering the last 12 to 24 months, and often utilising the expertise of specialist brokers who understand how to calculate contract employment income.

How can I get a mortgage if I have a rolling contract?

For UK prospective homeowners, obtaining a mortgage often hinges on proving income stability. A rolling contract – whether a fixed-term contract that frequently renews, or an ongoing contractor arrangement – presents a unique challenge because the guaranteed employment period is short. Lenders must be satisfied that your income stream is reliable enough to cover the mortgage repayments over the long term.

While many high-street lenders prefer applicants with standard permanent employment (PAYE) status, specialist lenders and building societies are increasingly adapting their underwriting criteria to accommodate modern working patterns, including those on rolling or short-term contracts.

Understanding How Lenders View Rolling Contracts

Lenders operate on risk mitigation. The perceived risk associated with a rolling contract stems from two main factors: non-renewal and income gaps. If your contract ends and you cannot secure a new one quickly, your ability to meet monthly repayments is compromised.

To overcome this risk assessment, lenders require robust evidence that your contract employment is not merely short-term but represents a sustained career path.

The Importance of Contract History

The single most important factor is the length and continuity of your contracting history. Most mainstream lenders will require you to demonstrate:

• Minimum 12 Months History: Ideally, you should have at least 12 months of experience working on similar contracts, usually within the same industry.
• Proof of Renewals: If your contract is technically fixed-term but has been renewed multiple times by the same company, this significantly strengthens your application, as it implies a long-term need for your skills.
• A Current Contract Length: Lenders typically prefer you to have at least three to six months remaining on your current rolling contract, or they may ask to see evidence of imminent renewal.

Key Criteria for Mortgage Approval

When assessing an application from someone on a rolling contract, underwriters focus heavily on the quality of the applicant’s work history and their financial stability.

1. Calculating Affordability

Unlike standard PAYE employees, where income is straightforward, calculating the income for a contract worker requires more nuanced consideration. Lenders will often use one of two methods:

• Day Rate Calculation: For contractors, many specialist lenders calculate annual income by multiplying your average daily rate by the expected number of working days in a year (typically 220–240 days), regardless of whether you are paid via an umbrella company or limited company structure.
• Average Earnings: Lenders may scrutinise bank statements and previous payslips (P60s if applicable) to calculate your average monthly or annual earnings over the last 12 to 24 months, smoothing out any brief gaps between contracts.

Understanding your employment status is crucial, particularly whether you are classed as an employee or a worker. You can find guidance on different types of employment status on the UK Government website.

2. Deposit Size and Loan-to-Value (LTV)

While a high deposit doesn’t solve the underlying income stability concern, it does reduce the lender’s risk. Applicants with rolling contracts often find better acceptance rates and more competitive interest rates if they can provide a larger deposit, reducing the Loan-to-Value (LTV) ratio. An LTV of 75% or less (meaning a 25% deposit or more) is often viewed favourably.

3. Credit Score and Financial Health

Lenders need confidence that you manage your existing debt responsibly. A strong credit history shows that despite fluctuating income, you consistently meet your financial obligations. Ensure your credit file is accurate and up-to-date before applying.

If you haven’t checked your credit file recently, it is highly recommended to do so to identify any potential errors or old debts that need clearing. 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)

Preparing Your Mortgage Application

Preparation is key when applying for a mortgage with a rolling contract. You need to present a clear, compelling case for financial stability. Gather the following documentation:

• Current and Previous Contracts: Provide copies of your contracts spanning the last two years, highlighting renewal dates and terms.
• Invoices and Bank Statements: Detailed bank statements (typically 6 months) showing consistent receipt of contract payments.
• Proof of Skills: While less common for standard mortgages, evidence of high-demand skills (e.g., in IT or engineering) can reassure a lender that securing future contracts will be straightforward.
• Up-to-Date CV: This helps the lender trace your employment continuity and demonstrates career progression.

The Role of Specialist Brokers and Lenders

For applicants whose income structure is complex due to rolling contracts, relying solely on standard high-street banks may lead to unnecessary rejections. Specialist mortgage brokers are invaluable because:

1. They have access to smaller building societies and niche lenders who offer bespoke underwriting for contract workers.
2. They understand the specific income calculation methods used by these lenders, ensuring your affordability is presented accurately and to its maximum potential.
3. They know which lenders will accept a shorter contracting history (e.g., six months rather than two years) based on industry and contract type.

Working with a broker saves time and minimises the risk of making multiple applications, which can negatively affect your credit score.

Potential Risks and Considerations

While obtaining a mortgage is possible, it is important to be aware that contract worker mortgages might involve slightly higher interest rates or fees compared to those offered to permanent employees, reflecting the perceived higher risk.

Crucially, if you secure a mortgage and then experience an extended period without securing a new contract, you must communicate immediately with your lender. Failure to maintain required repayments could lead to serious consequences.

Your property may be at risk if repayments are not made. Consequences can include legal action, increased interest rates, additional charges, and ultimately, repossession of the property.

People also asked

Can I get a mortgage if I have only just started a rolling contract?

It is generally much harder to secure a mortgage if you have just started a rolling contract. Lenders usually require a minimum of six to twelve months of verifiable contract history to prove stability. However, if you are moving from a permanent role to a contract role within the same, high-demand industry, some specialist lenders may be more flexible, provided you have a long contract (e.g., 12 months) secured.

Do lenders treat umbrella company contractors differently from limited company contractors?

Yes, they can. If you are paid through an umbrella company (effectively PAYE), lenders typically assess your income based on your payslips and P60, similar to a regular employee, though they may still look for contract longevity. If you operate via a limited company, assessment often relies on company accounts, dividends, and retained profits, requiring a more specialist underwriting approach.

How does a short gap between rolling contracts affect my application?

Short gaps (typically 4–6 weeks) between contracts are normal and usually acceptable, provided your total contract history is strong and you can show that new work was secured promptly. Multiple or lengthy gaps, however, will raise concerns about income reliability and may lead the lender to calculate your affordability based on a significantly lower annualised income.

Will I need a larger deposit if I am on a rolling contract?

While not strictly mandatory, having a larger deposit (20% or 25% rather than the minimum 5% or 10%) can significantly improve your chances of approval. This reduces the risk for the lender and may open up access to better interest rates that are typically reserved for lower LTV products.

Which documents are most important for proving contract stability?

The most important documents are the written contracts themselves, demonstrating the terms, dates, and renewal pattern. Alongside this, providing six months of bank statements and corresponding invoices that clearly show the money entering your account proves continuity and helps the underwriter verify your day rate and actual earnings.

Summary

Having a rolling contract does not preclude you from obtaining a mortgage, but it does necessitate a more strategic and detailed application process. By establishing a robust history of contracting work, maintaining excellent financial health, providing meticulous documentation, and engaging with specialist mortgage brokers, you can successfully navigate the criteria set by UK lenders and achieve your goal of homeownership.

The key is proving that the temporary nature of your employment agreement does not translate into temporary income, but rather a stable, professional career path.