Mortgages for contractors: A complete guide
Securing a job as a contractor can feel more daunting than it should. Traditional lending tends to favour people in full-time employment with a fixed salary, but contractors make up a vital and growing part of the UK workforce. The good news is that with the right lender — and the right preparation — contractors can access the same rates and competitive mortgage deals as salaried applicants.
This guide breaks down the main types of contractors, how lenders assess income, what borrowing power looks like, and the practical steps you can take to boost your approval chances.
Types of contractors and how lenders view them
The way a lender treats your application depends heavily on the type of contract you’re on. Here’s how different contractor setups are typically assessed:
1. High-value day rate contractors
For contractors earning £500+ per day (roughly £75,000+ per year), many lenders treat income as though it’s a standard salary. Instead of looking at company accounts or tax returns, they’ll often use a day-rate formula:
- Day rate x 5 working days x 48 weeks per year (allowing for holidays).
This can mean a £500/day contractor is assessed as earning £120,000 per year, boosting borrowing potential compared to self-employed income where expenses reduce the figure.
2. CIS (Construction Industry Scheme) contractors
CIS contractors are in a unique position. Some lenders take a very favourable view and treat them as employed, basing affordability on payslips rather than tax returns. This usually means looking at an average across:
- 3, 6, 12, or 24 months’ CIS income.
Because business expenses aren’t factored in, the usable income figure is often higher, giving CIS contractors stronger borrowing power than if assessed as self-employed.
3. Zero-Hours Contractors
For contractors on zero-hours contracts, lenders focus on stability and consistency. Rather than your latest payslip, they’ll want to see evidence of steady work patterns, usually by averaging:
- 12 months of earnings.
Having at least a year’s history is typically the minimum requirement. Large gaps or highly irregular income can create challenges, so maintaining continuous employment is key.
4. Fixed-term contractors
Fixed-term contracts are common in industries such as IT, healthcare, and education. Lenders assess both the current contract and overall contracting history, and usually look for one of the following:
- At least 6 months left on the current contract, or
- Two years of contracting history, or
- Written confirmation that the contract will be extended.
The aim is to reassure the lender that your income is reliable and ongoing.
5. Umbrella company contractors
If you’re paid via an umbrella company, lenders will usually assess you in a similar way to permanent employees. However, they want reassurance that this setup is long-term, so they typically ask for:
- 12 months of payslips.
As with other contractor types, the more consistent your history, the better your options. Strive Mortgages are expert mortgage brokers for umbrella contractor mortgages,
How much can contractors borrow?
Contractors generally fall under the same borrowing multiples as other applicants, but the way income is calculated makes the difference. Broadly speaking:
- 5 – 5 times annual income is the norm.
- With the right lender and profile, it can sometimes stretch to 5 or even 6 times income, though this is less common.
Factors such as deposit size, credit history, and household outgoings all influence the final figure.
Do contractors pay higher mortgage rates?
One of the biggest myths is that contractors face higher mortgage rates. In reality:
- Rates are usually identical to those offered to permanent employees.
- The key difference lies in eligibility and affordability checks — proving your income is stable enough to support the borrowing.
So, if you’re a contractor with a strong record, you can access the same competitive deals as any other applicant.
How to improve your chances of approval
Even the best contractors can run into hurdles if their application isn’t positioned correctly. To boost your chances:
- Maintain consistency – Try to avoid long gaps between contracts or extended breaks.
- Check your contract length – If you’re on a fixed-term deal, the more time left, the better.
- Keep your credit strong – Lenders want to see responsible borrowing and repayment habits.
- Save a bigger deposit – More deposit means less risk to the lender, which can open up more options.
- Use a specialist broker – A mortgage broker who understands contractor mortgages can match you with lenders who take a flexible view.
Final thoughts
While contractor mortgages have a reputation for being complex, in reality, many lenders are open-minded and increasingly flexible. High-value day rate contractors, CIS workers, zero-hours staff, and umbrella employees all have pathways to secure borrowing — as long as income is presented correctly.
The key takeaway? Preparation and presentation are everything. With the right paperwork and the right broker, contractors can unlock the same mortgage opportunities as any employed applicant. Strive Mortgages are expert mortgage brokers for contractors.