What documents are needed for remortgaging as a contractor?

Remortgaging as a contractor in the UK requires a different approach to proving income compared to a permanently employed applicant. Lenders need evidence of consistent earnings and contract stability, meaning you must provide comprehensive financial documentation, including long-term contract history, recent personal and business bank statements, and full self-assessment (SA302) tax calculations, usually spanning two to three years. Due to the variable nature of contract work, specialist lenders or brokers are often best positioned to help navigate the specific underwriting criteria.

What Documents Are Needed for Remortgaging as a Contractor?

The process of remortgaging involves switching your existing mortgage to a new deal, either with your current lender or a different provider. While this process is standard for salaried employees, contractors, freelancers, and self-employed individuals face increased scrutiny regarding their income stability.

Lenders view permanent employment as inherently more stable than contract work. To counteract this perception, you must provide robust evidence that your contracting income is sustainable, predictable, and sufficient to cover the mortgage repayments.

Understanding Contractor Status and Remortgaging

Before gathering your documents, it is crucial to understand how lenders classify your contracting status, as this dictates the exact paperwork they require. There are three main classifications:

• Limited Company Director (Outside IR35): You own and run your own limited company and pay yourself via a combination of salary and dividends. Lenders will assess the company’s profitability.
• Umbrella Company Contractor (Inside IR35): You are effectively an employee of an umbrella company, which handles tax and National Insurance contributions. Your documentation will closely resemble that of a standard employee (P60s and payslips), although specific contract details are still crucial.
• High-Earning Day Rate Contractor: Many lenders offer specialist ‘contractor mortgages’ where they calculate affordability based on your gross day rate, ignoring the complexity of company accounts, provided you meet minimum income thresholds and demonstrate a strong history.

Core Financial Documentation for Contractors

The primary hurdle for any contractor remortgaging application is proving the consistency of their income over time. This requires detailed financial records.

Tax Documentation: SA302s and Tax Year Overviews

For most contractors operating as Limited Company Directors or genuine sole traders, lenders require your official self-assessment records. These documents confirm the income you have declared to HMRC and are essential for verifying affordability.

• SA302 Tax Calculation Forms: These detail the income you declared for a specific tax year. Most lenders require documentation covering the last two or even three full tax years to demonstrate a reliable income trend.
• Tax Year Overviews: These summaries, obtained directly from HMRC, prove that the tax calculated in your SA302s has been paid, acting as an essential validation of your declared income.

If you have struggled to locate these documents, you can download them directly from your HMRC online account or request copies through your accountant.

Limited Company Accounts (If Applicable)

If you are remortgaging using your Limited Company structure, you will need to provide the following, typically covering the last two years:

• Full statutory accounts, signed off by a certified accountant (AAT, ACA, ACCA, or CIMA registered).
• Proof of your retained profits. Some specialist lenders may assess your affordability based on the total net profit of the company rather than just the salary and dividends you draw, which can significantly increase your borrowing potential.
• Corporation Tax returns.

Business and Personal Bank Statements

Lenders need to trace the money from your contract work into your personal account. They usually require statements covering the last three to six months for both your personal account and, if applicable, your business account.

• These statements must show regular, consistent payments from your contracting work or umbrella company.
• They are used to check for evidence of affordability, ensuring your debt obligations (such as credit cards or loans) align with your declared income and monthly expenditure.

Employment and Contract History Documentation

Unlike permanent employees who provide a standard P60 and employment contract, contractors must supply detailed paperwork related to their assignments.

• Current Contract: A copy of your signed, current contract. This must clearly state your day rate, the contract duration, and details of the client or agency. The remaining duration of the contract is crucial; lenders typically prefer contracts with at least three to six months remaining.
• Contracting History (CV): A detailed chronological CV showing your work history over the last 12 to 24 months. This demonstrates continuity in your chosen field.
• Previous Contracts: Documentation of the contract immediately preceding your current one. Lenders look for short gaps between assignments (ideally no more than six weeks).

Specialist lenders may offer favourable terms if you have a minimum of 12 months’ contracting history, even if this includes multiple short-term assignments, provided there are no significant gaps.

Standard Documentation Requirements for Remortgaging

Regardless of your employment status, there are essential documents needed for remortgaging that prove your identity, residence, and the details of the property and existing debt.

Proof of Identity and Address

• Proof of Identity (ID): Current valid passport or UK driving licence.
• Proof of Address (POA): Utility bill, council tax statement, or bank statement (dated within the last three months, excluding mobile phone bills).

Property and Existing Debt Information

• Existing Mortgage Statements: Detailed statements from your current lender showing the remaining balance, repayment history, and confirming your account is up to date.
• Proof of Deposit or Equity: If you are raising additional capital (a ‘further advance’) or borrowing more, you must provide statements confirming the source of any extra funds. For standard remortgaging, the valuation confirms the equity you hold.
• Property Valuation Report: The new lender will arrange for a valuation survey of your property to confirm its market value and calculate the Loan-to-Value (LTV) ratio.

Credit File Information

Your credit history plays a vital role in any remortgaging application. Lenders will perform a credit search to assess your financial reliability.

Before applying, ensure your credit file is accurate and up-to-date. 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)

Any defaults, missed payments, or County Court Judgements (CCJs) must be disclosed, as they could affect the rates you are offered.

Navigating Remortgaging Challenges as a Contractor

The complexity of providing consistent income proof means that securing a favourable remortgage deal can be challenging, particularly if you have recently started contracting, have frequent or long gaps between assignments, or operate a limited company with highly retained profits.

It is highly recommended that contractors use a mortgage broker who specialises in contractor documentation and underwriting criteria. These brokers often have access to specific products from specialist lenders who are comfortable with assessing income based on day rates rather than relying solely on SA302s or declared dividends.

Ensure all your submitted documents are clear, legible, and consistent. Discrepancies between your bank statements and your declared income can lead to delays or outright rejection.

People also asked

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

Most mainstream lenders prefer a minimum of 24 months of continuous contracting history. However, some specialist lenders may consider applicants with as little as 12 months’ experience, provided they can demonstrate strong future contract visibility and a high day rate.

Do all lenders use my day rate for affordability calculation?

No, only specialist lenders offer true ‘day rate’ contractor mortgages. Many high street lenders still insist on calculating affordability based on your declared income (salary plus dividends or sole trader profits) evidenced by SA302s, which can restrict borrowing for limited company directors who retain significant company profits.

Can I remortgage if I have recently changed contracts?

Yes, but the transition period is key. Lenders prefer minimal gaps (ideally under six weeks) and want to see that the new contract is in the same professional field as previous assignments. Having the new contract signed and a good portion of the term remaining is vital for approval.

What is the typical Loan-to-Value (LTV) limit for contractors?

Contractors generally have access to the same LTVs as permanent employees, often up to 90% or 95% LTV, provided their credit history is clean and their income documentation meets the lender’s stringent criteria for consistency and sustainability.

Is it harder for contractors to remortgage than to get their first mortgage?

Generally, remortgaging should be slightly easier than the initial purchase mortgage because you already have a history of managing mortgage repayments. However, if your income structure has changed drastically or you have moved from permanent employment to contracting since your last mortgage, the current application will be treated almost as a new assessment of risk.

Successfully remortgaging as a contractor relies heavily on meticulous preparation and ensuring you match your application to the right lender. By proactively gathering the required documents—from multi-year tax overviews and detailed bank statements to comprehensive contract history—you demonstrate the reliability necessary to secure your new mortgage deal.