Which lenders offer contractor mortgages?

Securing a mortgage when you work as a contractor can often feel more challenging than it is for permanently employed individuals. Traditional lenders typically assess affordability based on two to three years of audited accounts or Payslips and P60s, neither of which perfectly reflect the income structure of a high-earning, short-term contractor.

Fortunately, the UK mortgage market has evolved significantly, recognising the valuable contribution and reliable income generated by professional contractors. Many lenders now specialise in this area, offering bespoke criteria tailored to how contractors operate.

Which Lenders Offer Contractor Mortgages in the UK?

The UK mortgage landscape for contractors is split between two main types of providers: high street banks and building societies, and specialist mortgage lenders. The key difference lies in how they assess your income.

Understanding How Lenders Treat Contractor Income

When you approach a lender, they need assurance that your income is stable and sufficient to cover the mortgage repayments. For contractors, the challenge is that much of your pay may be structured as dividends or day rates, which do not fit the standard employed payroll model.

Lenders who truly offer contractor mortgages typically use one of two calculation methods:

1. The Day Rate Multiplier: This is the most favourable method. Lenders calculate your annual income by multiplying your daily rate by the number of working days they assume you take per year (typically 46 to 48 weeks, or 230 to 240 days). They do this regardless of how you extract your income (salary plus dividends).
2. Standard Self-Employed Accounts: Less contractor-friendly lenders will insist on reviewing your last two or three years of business accounts, looking primarily at salary plus dividends, or net profit if you operate as a limited company. This method often disadvantages contractors who minimise declared income for tax efficiency.

Therefore, when asking which lenders offer contractor mortgages, you are primarily looking for lenders who employ the Day Rate Multiplier approach.

Specialist Lenders vs. High Street Options

While many high street names accept contractor applications, the underwriting criteria often differ significantly between providers. Specialist lenders, or dedicated mortgage desks within larger institutions, often provide more flexible solutions.

Specialist Lenders and Brokers

Specialist lenders are often more pragmatic about complex income structures, short employment gaps, and unique company setups (like umbrella companies). They are typically accessed via specialist mortgage brokers who have established relationships with their underwriting teams.

• Flexibility: They often require shorter contract histories (sometimes only 12 months in the industry) and are more likely to accept a future contract signed but not yet started.
• Speed: Because they deal with contractor cases daily, the underwriting process can sometimes be quicker once the required documentation is supplied.
• Criteria: They are more likely to accept high Loan-to-Value (LTV) mortgages based purely on the day rate calculation.

Mainstream Banks and Building Societies

Many household names have introduced specific “Contractor Mortgage” products to attract this lucrative market segment. However, their internal requirements can vary dramatically:

• Some large building societies have excellent, transparent contractor policies, requiring minimal paperwork beyond the current contract and CV.
• Other major banks may claim to offer contractor mortgages but still apply strict rules, such as demanding that the contractor must have been working for the same employer for 12 months or requiring accounts showing sustained profit over three years, which negates the benefit of being a contractor.

Due to the frequent changes in lending policy, pinpointing the exact individual lenders that consistently offer the best terms is challenging. An independent mortgage broker specialising in contractor finance will know the real-time policy changes and which banks are currently most favourable.

Key Criteria Contractors Typically Need to Meet

Regardless of which lender you approach, there are standard requirements most contractor-friendly providers look for:

Contract History: Typically, lenders require proof of continuous contracting for at least 12 months, usually evidenced by two or three consecutive contracts. Some lenders may be more lenient if you have substantial previous experience in the relevant industry.

Contract Length: The current contract should usually have at least six months remaining. If it has less than three months remaining, you will often need an extension or a confirmed offer of a new contract to be presented simultaneously.

UK Residency: Standard residency and credit checks apply, although some specialist lenders may assist UK contractors returning from international work.

Day Rate Evidence: Lenders require copies of the contract, corresponding bank statements showing regular payments, and possibly invoices.

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The Affordability Calculation: How Day Rates Translate to Loan Amounts

The core benefit of contractor mortgages is the way affordability is calculated. When assessed under a specialist criteria, a £500 per day rate can translate into a significant borrowing capacity.

Example Calculation (Standard 48-Week Model):

• Day Rate: £500
• Assumed working days per week: 5
• Assumed working weeks per year: 48
• Annualised Income: £500 x 5 days x 48 weeks = £120,000

A lender will then typically offer 4.5 to 5 times this annualised figure, meaning a contractor earning £500 per day could potentially borrow between £540,000 and £600,000, subject to standard stress testing (checking if you could still afford repayments if interest rates were higher).

This contrasts starkly with the traditional method, where if the contractor only draws a £15,000 salary and £50,000 in dividends, the lender might cap the borrowing based only on the £65,000 declared income.

Documentation Required for Contractor Mortgage Applications

The necessary paperwork for contractor mortgages is usually far less burdensome than for traditional self-employed applications, but it must be precise. You will typically need:

• A copy of your current contract, showing the day rate and end date.
• Copies of previous contracts or a detailed CV demonstrating continuous work history (usually 12–24 months).
• Bank statements (personal and/or business) showing receipt of contract payments for the last three to six months.
• Proof of identity and address (passport, driving license, utility bills).
• If working through an umbrella company, recent Payslips may be requested to confirm payment consistency.

For official guidance on preparing for a mortgage, including understanding the legal aspects, you may wish to review information available from independent sources such as the MoneyHelper website.

Risks and Considerations for Contractor Borrowing

While specialist lenders make contractor mortgages highly accessible, it is important to remember that they are still substantial loans. Your ability to maintain repayments relies heavily on your continued contract employment.

Contractors, by definition, face periods between contracts. Any extended period without work or a significant drop in day rate could impact your ability to service the debt. As with any mortgage agreement, your property may be at risk if repayments are not made. Consequences of default can include legal action, increased interest rates, additional charges, and, ultimately, repossession.

People also asked

Can I get a contractor mortgage with a poor credit history?

It is significantly harder, but not impossible. While mainstream lenders offering the best rates typically require an excellent credit score, certain specialist mortgage providers may consider applicants with historic adverse credit, provided the issues were minor and settled, and your contracting income is strong and stable.

Do I need two years of accounts to get a contractor mortgage?

No, one of the primary benefits of contractor-specific mortgage products is that the lender uses your current day rate rather than relying on two or three years of audited company accounts. They often require only 12 months of consecutive contracting history in total.

Are contractor mortgages more expensive than standard mortgages?

Contractor mortgages are sometimes slightly more expensive than the lowest available rates offered to standard PAYE employees with spotless histories, especially if you have a complex company structure or minimal deposit. However, competition in the market means that contractor rates are often very competitive and can be comparable to mainstream offerings.

What if I work through an umbrella company?

If you work through an umbrella company, you are typically considered a highly paid employee. Many contractor-friendly lenders will simply look at your current contract and calculate affordability based on the gross contract value (day rate), ignoring the deductions and employment status, provided you can evidence regular payments.

What deposit is needed for a contractor mortgage?

Generally, you will need a minimum deposit of 10% (90% LTV), though having a 15% or 20% deposit will open up a wider selection of lenders and potentially better interest rates. Some lenders may offer 95% LTV products, but these are often limited and require excellent credit and very strong contract income.

Conclusion

The range of lenders who offer contractor mortgages is extensive and constantly shifting, encompassing both dedicated specialist firms and flexible high street departments. For contractors, the key to success is finding a lender that assesses affordability based on your lucrative day rate rather than relying on standard self-employed accounting methods.

The most efficient way to navigate the options and determine which specific lenders are currently offering the best rates and criteria for your individual circumstances is by consulting a specialist mortgage broker who understands contractor finance intimately.