If you contract for a living, the single biggest factor in what you can borrow is not your income. It is whether the lender you approach treats you as a contractor at all. Assessed on your accounts you might be offered £200,000. Assessed on your contract value, the same person on the same day rate could be offered well over £400,000. Nothing about you changes. Only the method does. That, in a sentence, is what a contractor mortgage is.
Key takeaway: Several lenders will ignore your accounts entirely and work from your annualised contract value instead. The usual calculation is day rate x 5 days x 46 weeks, so a £500 day rate becomes £115,000 of assessable income regardless of what you have drawn or what your tax return shows. Thresholds vary enormously between lenders, and some apply no minimum income at all.
[[stats: No minimum = Income required by some lenders | x5 x46 = How your day rate is annualised | 6 Months = Contract history with some lenders | 5% = Minimum deposit available | Exclusive rates = Via our lender network | National = Coverage across the UK]]
Why contractors get undersold
There is no single definition of a contractor in mortgage lending, and that is the root of the problem. When you approach a lender, one of three things happens.
Most commonly, the lender puts you through its standard self-employed process. It asks for two years of SA302s, takes your net profit after expenses, and averages it. Everything you legitimately claimed against tax now works against you, because it reduced the figure the lender is looking at.
If you contract through a limited company, you may instead be assessed as a company director. That usually means salary plus dividends drawn. If you have been paying yourself efficiently and leaving profit in the business, the lender sees a fraction of what your business actually earns.
The third possibility is that the lender assesses you as a contractor, using the value of your contract. This is the route most contractors do not know exists, and it is almost always the most generous.
[[table: How you are assessed | What the lender uses | Typical result ;; As self-employed | Two years of net profit from your SA302s, averaged | Lowest, because expenses have already reduced the figure ;; As a company director | Salary plus dividends actually drawn from the company | Low if you pay yourself tax-efficiently ;; As a contractor | Your annualised contract value, before expenses | Usually the highest of the three]]
To put that in plain numbers: assessed as a contractor, a £450 day rate becomes £103,500 of income. Assessed on two years of averaged net profit after expenses, the same contractor might show £55,000. At 4.5 times income that is the difference between roughly £465,750 and £247,500 of borrowing. A contractor mortgage assessed the right way is worth more than any rate saving you are likely to find.
If you are being assessed under either of the first two routes, our guides on self-employed mortgages and mortgages for company directors explain how to get the most out of each. This guide is about the third route.
How a contractor mortgage is calculated
The principle is simple. Rather than looking backwards at what your business declared, the lender looks at what your current contract is worth over a year and treats that as your salary.
Example: Day rate x 5 days x 46 weeks. A contractor on £450 a day is assessed as £450 x 5 = £2,250 a week, x 46 = £103,500 a year. At 4.5 times income that supports roughly £465,750 of borrowing. This is an illustration only and not a quotation.
The 46 weeks is deliberate. It builds in around six weeks a year of holiday and gaps between contracts, which is why lenders are comfortable treating the figure as sustainable. Not every lender uses 46 though, and the difference matters: Coventry works on 41 weeks, which on the same £450 day rate produces £92,250 rather than £103,500.
What day rate do you need?
There is no universal minimum, and this is where a lot of contractors rule themselves out unnecessarily. Lenders set the bar in very different places, and some do not set one at all.
Virgin Money applies no minimum income requirement to day rate contractors, asking instead for a longer track record where earnings are lower. Skipton publishes no minimum day rate either. Accord starts at £300 a day or £50,000 a year, Coventry at £50,000 a year, and NatWest at £75,000 a year. Halifax sets a higher bar at £500 a day or £75,000 a year, but waives it entirely for IT contractors.
The practical implication is that a day rate which rules you out with one lender may be perfectly acceptable to another, so a single decline tells you very little about the market as a whole.
Do you qualify for a contractor mortgage?
The day rate is only half of it. Lenders also want to see a track record, and this is where applications most often come unstuck.
Broadly, you will need:
- Contract history. Anywhere from six months of completed contracts with the more flexible lenders, up to two years of experience in your field with others.
- A current contract. Usually with a minimum period still to run, and evidence of an extension or new contract if you are close to the end.
- Manageable gaps. Lenders expect breaks between contracts, but they set limits on how long.
- The right company structure, if you contract through a limited company. Several lenders restrict the contractor route to cases where you are the sole shareholder, or share ownership only with a spouse or partner who is also on the application.
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Which lenders are best for contractor mortgages?
Contractor criteria vary more than almost any other area of lending. Below are six lenders with published contractor policies, taken from their own intermediary criteria. Others offer contractor mortgages too, and the best fit genuinely depends on your day rate, your history and how your company is structured.
[[table: Lender | Minimum income | How income is calculated | Contract history needed ;; Accord | £300 per day or £50,000 a year | Up to 46 weeks of the current contract | 6 months minimum track record ;; NatWest | £75,000 a year | Weekly contracted income x 46 | Contracts covering 12 months, 6 already completed ;; Skipton | No published minimum day rate | Day rate x 5 x 46 weeks | 12 months contract history, 2 years in the field ;; Virgin Money | No minimum income requirement | Current contract x 46 weeks | 1 year contracting if earning £50,000+, otherwise 2 years ;; Halifax | £500 per day or £75,000 a year, or any income if IT | Day rate x 5 x 46 weeks | 12 months continuous with 6 months left, or 2 years in the same work ;; Coventry | £50,000 a year | Day rate x 5 x 41 weeks | 12 months in the same line of work]]
[[lenders: Accord | Low entry point at £300 a day and the shortest track record, at six months. ;; NatWest | Flexible on structure, covering limited company, sole trader, umbrella and fixed-term alike. ;; Skipton | No published minimum day rate, and the same calculation whether sole trader or limited company. ;; Virgin Money | No minimum income at all, and up to 95% LTV for day rate contractors. ;; Halifax | Treats IT contractors as employed on any income, with no day rate threshold. ;; Coventry | Uses 41 weeks rather than 46, but does not deduct umbrella company costs.]]
In short: Accord and Virgin Money tend to suit contractors earlier in their career or on lower rates, Skipton and Halifax reward a longer track record, Coventry is often strongest for umbrella contractors because it does not deduct those costs, and NatWest is the most flexible on how the contract itself is structured.
Lender criteria described here were taken from each lender's published intermediary criteria and were correct at the time of writing. Criteria change regularly, so a mortgage broker at Quanstrom Financial will confirm what currently applies to your circumstances.
Work out your own figures
Enter your day rate below to see how it annualises and what that could support in borrowing. Adjust the days per week and weeks per year if your pattern differs from the standard assumption.
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How different types of contractor are assessed
The contractor route covers a wider range of work than most people assume, though the mechanics differ depending on how you are paid.
IT and professional day-rate contractors
This is the classic case contractor mortgage criteria were designed around: IT contractors, engineers, project managers, consultants and similar professionals working on defined contracts at a set day rate.
IT contractors in particular are treated favourably. Halifax will assess an IT contractor as employed on any income, without applying its usual £500 a day or £75,000 threshold, which is a meaningful advantage if your rate sits below where other lenders draw the line.
Umbrella company and fixed-term contractors
Being paid through an umbrella company does not exclude you, and nor does operating inside IR35. Virgin Money accepts both.
The detail worth knowing is how deductions are handled. Virgin Money deducts statutory employer costs, including employer National Insurance and the Apprenticeship Levy, plus payroll service costs, before multiplying by 46 weeks. Coventry does not deduct umbrella costs at all, which can make a real difference to the final figure.
Fixed-term contractors are treated similarly, generally needing a current contract with a minimum period remaining plus evidence of history in the same field. Virgin Money asks for a two year track record in the same line of work for fixed-term, agency and zero hours contracts.
CIS subcontractors
Construction Industry Scheme workers are handled differently again, and usually not through the day rate calculation. Lenders tend to work from your gross CIS income rather than an annualised contract value. NatWest uses the gross figure less expenses from 12 months of contract vouchers or statements, and asks for the application to be keyed as employed rather than self-employed. Virgin Money assesses CIS income under its self-employed policy instead.
The approaches vary enough that timing your application can genuinely change the outcome, particularly if your work is seasonal. Our guide to CIS contractor mortgages explains how the different methods compare.
Dentists, locums and medical contractors
Associate dentists, locum doctors and bank nurses are assessed in a similar spirit to contractors but usually on invoices rather than a day rate. Skipton, for example, averages 12 months of gross income from payslips, invoices or an employer summary, and requires any UDA (Unit of Dental Activity) deductions to be accounted for. Weekly payslips are not accepted as evidence.
Because this route works from gross invoices rather than post-expenses profit, it is often considerably more generous than standard self-employed criteria. Our guide to mortgages for associate dentists covers it in detail.
What can reduce the income a lender uses
The annualised figure is a starting point, not always the final number. Lenders will look for costs you carry personally that the contract does not cover, and deduct them from the income they assess.
NatWest publishes a list of what it looks for, which is a good guide to what any lender will consider:
- Car or finance loans
- Extended travel and accommodation costs
- Training courses
- Professional indemnity insurance
- Salaries paid to a partner, spouse or employee
This is not a reason to avoid claiming legitimate costs. It is a reason to be prepared to explain them, and to have your bank statements in order before you apply rather than after questions start.
Gaps between contracts
Every contractor has gaps, and lenders know it. What matters is how long and how recent.
Accord treats gaps of up to eight weeks as standard. NatWest and Virgin Money both want no more than a six week break, though Virgin asks you to speak to them rather than ruling it out automatically. Skipton takes a different approach again: rather than declining, it pro-rates the calculation, so an eight week gap means your day rate is multiplied by 38 weeks instead of 46.
If you have had a longer break it does not necessarily rule you out, but it does change which lender is likely to work. Raise it upfront rather than hoping it goes unnoticed, because it will not.
What documents will you need?
- Your current contract, and usually the previous one, covering the period the lender wants to see
- Evidence of a contract extension or new contract if there are only a couple of months left to run
- Three months of personal bank statements, and usually three months of business bank statements
- A CV, where the lender wants evidence of experience in your field
- Proof of identity and proof of deposit
- If you are CIS, 12 months of CIS vouchers, statements or invoices, though some lenders can work from three months
- If you are a locum or associate dentist, 12 months of invoices, payslips or an employer summary, though again three months can be enough with some lenders
Common contractor mortgage mistakes worth avoiding
Assuming your day rate is too low
Thresholds vary widely and some lenders apply none at all, so a rate that fails one lender's test may be perfectly acceptable elsewhere.
Assuming you have to wait for two years of accounts
A contractor mortgage does not depend on filed accounts at all, so a contractor with six months of contract history behind them may be in a stronger position than they realise.
Applying directly to a lender who does not offer contractor criteria
A decline on your credit file is worth avoiding. Not every lender offers this route, and several that do are only accessible through a broker.
Restructuring your company shortly before applying
Adding a shareholder can quietly remove your access to the contractor route with several lenders. Virgin Money, for example, accepts a limited company provided you do not employ other contractors or hold more than one contract. If you are planning a change and a purchase at the same time, take advice on the order before you act.
Not accounting for umbrella deductions
If you are paid through an umbrella company, work from your post-deduction figure when budgeting rather than your headline day rate, unless you are with a lender that does not deduct them.
Areas we serve
We are based in Eastbourne, East Sussex, however service many of our clients all over the country. Contract work rarely stays in one place, and neither do we: whether you are contracting in London, the South East, the Midlands or further afield, a contractor mortgage can be arranged wherever in the UK you are buying.
Everything is handled by phone, video call and email, so you do not need to be local to us to get the same advice. If you would rather meet in person and you are in Eastbourne or the surrounding East Sussex area, you are very welcome to.
Frequently asked questions
Can I get a mortgage as a contractor?
Yes. Contractors are well catered for, and with the right lender you may be assessed on your contract value rather than your accounts, which usually supports a higher loan than standard self-employed criteria would.
What day rate do I need for a contractor mortgage?
There is no universal minimum. Virgin Money applies no minimum income requirement and Skipton publishes no minimum day rate, while Accord starts at £300 a day or £50,000 a year and NatWest at £75,000 a year. A rate that is too low for one lender may be perfectly acceptable to another.
How is my day rate turned into an annual income?
Most lenders multiply your day rate by five days and then by 46 working weeks, which allows for holiday and gaps between contracts. Coventry uses 41 weeks instead, which produces a lower figure on the same day rate.
How long do I need to have been contracting?
It varies considerably. Accord looks for a minimum six month track record, NatWest wants contracts covering a 12 month period with at least six months completed, Coventry asks for 12 months in the same line of work, and Skipton wants 12 months of contract history plus two years of experience in the field.
Is it easier to get a contractor mortgage as an IT contractor?
In some cases yes. Halifax will treat an IT contractor as employed on any income rather than applying its usual day rate threshold, which opens the door to contractors on lower rates than other lenders would consider.
Does it matter if I contract through a limited company?
It can. Several lenders restrict the contractor route to cases where you own the company outright, or share it with a spouse or partner who is also on the mortgage application. Virgin Money accepts a limited company provided you do not employ other contractors or hold more than one contract.
Can I use this route if I am paid through an umbrella company?
Yes, with lenders who accept umbrella contractors, and IR35 status is not necessarily a barrier. Bear in mind that some lenders work from your income after umbrella deductions while others do not deduct them at all, which can change the figure materially.
Do gaps between contracts stop me getting a mortgage?
Not usually. Lenders expect them and set their own tolerances, commonly six to eight weeks. Some pro-rate the calculation for longer gaps rather than declining outright.
Are CIS subcontractors assessed the same way?
Not quite. CIS income is generally assessed on gross CIS income rather than an annualised day rate, and some lenders assess it under their self-employed policy instead. Twelve months of evidence is typical, though some lenders can work from three.
Do I need a bigger deposit as a contractor?
Not automatically. Deposits typically start from 5% of the property value, and Virgin Money lends up to 95% LTV to day rate contractors. Being a contractor does not itself trigger a higher deposit requirement.
Do you arrange contractor mortgages outside Eastbourne?
Yes. We are based in Eastbourne, East Sussex, but arrange contractor mortgages for clients across the UK. Everything can be handled remotely, so where you live and where you contract make no difference to the advice you receive.
Should I go direct to a lender or use a broker?
Contractor criteria are one of the least consistent areas of mortgage lending, and several of the lenders offering the most generous treatment are only reachable through an intermediary. Quanstrom Financial is a whole-of-market broker, so we can identify which lender will read your contract most favourably before an application is submitted rather than after a decline.
Written by Toby Quanstrom CeMAP, Director at Quanstrom Financial, a whole-of-market mortgage broker based in Eastbourne, East Sussex, specialising in contractor mortgages and mortgages for self-employed professionals and business owners.
This article is general information only and does not constitute personal advice. What you may be able to borrow depends on your individual circumstances and lender criteria. Calculator figures are illustrations only and are not a mortgage offer.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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