A contractor mortgage is an ordinary residential mortgage assessed in an unusual way. Instead of reading payslips or an employer’s reference, a lender offering contract-based underwriting reads your contract and annualises the rate on it.
The standard calculation is: day rate × days worked per week × weeks worked per year. A contractor on £500 a day, five days a week, assessed over 46 weeks, is assessed on £115,000 — not on the £45,000 they chose to draw from their limited company. That gap is the reason specialist contractor mortgage advice still matters.
No single lender does all of these. Criteria differ on minimum day rate, minimum contracting history, minimum contract term remaining, how gaps are treated, and how many weeks a year they annualise over. Some use 46 weeks, some 48, a few 52.
A copy of your current contract, signed by both parties.
Evidence of contracting history or prior employment in the same field, plus your CV in some cases.
Three to six months of business or personal bank statements.
Often 5% to 10%, depending on lender and case.
Two things determine what you can buy: the interest rate, and the income figure the lender is willing to work from. For most contractors the second is worth far more than the first. A lender half a percent cheaper is no use if it will lend you £180,000 less.
Mortgage Knight is a directly authorised, whole-of-market brokerage. Our role is to identify which lenders will treat your specific contract most favourably, then present the case in the format that lender’s underwriters expect.
Situation: Two years contracting through his own limited company, drawing £12,570 salary and £38,000 dividends. His bank assessed him on £50,570 and offered around £227,000.
Approach: Placed with a lender annualising the gross contract rate over 46 weeks — £142,600 assessed income.
Outcome: £545,000 at 85% LTV on a five-year fix. Offer issued in 16 working days.
Situation: Three years of continuous assignments through an umbrella, with two short gaps. Two lenders had already declined on the gaps.
Approach: Selected a lender that assesses the assignment rate and tolerates up to eight weeks a year out of contract.
Outcome: £310,000 at 90% LTV. First-time buyer purchase completed to the developer’s deadline.
Situation: Left a £96,000 employed role in the same profession to contract. No contracting history at all.
Approach: A day-one lender accepted the signed contract on the strength of nine years’ relevant prior employment.
Outcome: £480,000 assessed on £161,000 annualised income.
Not usually. Where a lender offers contract-based underwriting, contractors typically access the same product range as an employed applicant at the same loan to value.
Some lenders want two years, others twelve months, and a smaller group will consider a contractor from the first day of a first contract where there is a relevant employment history behind it.
Both approaches exist across the market. Contract-based lenders work from the gross rate stated on the contract, which is usually the higher figure for limited company contractors.
Deposits typically start from 5% to 10% of the purchase price, depending on the lender and the strength of the case. A larger deposit widens the lender list.
Often yes. Some lenders require three or six months remaining; others will accept a shorter term where there is a history of renewals with the same client.
