Contractor Mortgage Daily Rate

Podcast approved by The Openwork Partnership on 03/06/2025

What do we mean by a daily rate contractor? Can a contractor on a day rate get a mortgage?

A daily rate contractor is usually someone on a fixed term contract. They’ve agreed a set period of employment or they have a contract between their business – perhaps a limited company – and another.

Generally, the contract has a start date and an end date, and often involves a day rate. They’re paid a set amount per day rather than a salary or weekly pay.

I’ve seen all sorts of different types. Some people just work one or two days a week, but often it’s four or five days – a standard Monday to Friday job. Generally, these are people in certain professions or career paths.

You can absolutely get a mortgage. We’ve helped a lot of day rate contractors who have been told they can’t get a mortgage, or that they need to be employed, or they will be assessed as self-employed. That’s sometimes the case with some lenders.

It can be challenging if you’re approaching lenders that don’t view contractors as simply as others. It’s not always the most straightforward, so I suggest getting help from someone experienced like us.

What are the different types of daily rate contractors?

Day rate contractors tend to take on short term projects and short term employment contracts. That’s a benefit for both the employer and yourself. Contracting is normally in specific skill sets or professions – we commonly see them in construction, IT and the creative industries – like graphic designers and photographers.

It’s a frequent set-up in trades, as well, for electricians and plumbers, for example. Contracting is a way to do these short term projects for an employer, charging a daily rate. It can be for a week, a month, six months or two years.

We see all sorts of varieties in terms of projects. There isn’t a particular standard or particular industry.

What criteria and/or proof does a daily rate contractor need to provide when applying for a mortgage?

It depends on the bank or building society you are applying with. Each lender will have their own criteria. They may ask for documents that other lenders don’t.

You usually need to provide a copy of your current contract, to evidence the terms you’re on. That includes when you started, the end date, how much you’re paid per day, who you’re working for and what the terms of that role are.

Most lenders also want to see that you’ve been contracting for a while, often two years or more. There might be a requirement to provide previous employment contracts or fixed term contracts to prove this isn’t your one. It’s not impossible if it is your first, but it does limit you.

You may also need payslips and invoices, depending on how you’re paid. If you’re employed, it’s usually payslips. You might be doing self-assessments, or be paid through a limited company or an umbrella company, in which case it might be invoices from your business. You might need those details for the last three or six months.

Standard documents would also be needed – such as ID via your passport or driving licence, and ideally a credit report to show us what the banks can see. That helps us recommend the most suitable lender given your circumstances. You will also need three months’ bank statements showing your income going in, and confirming there are no undisclosed credit commitments.

What if I’ve only recently become a contractor? Can I get a mortgage?

It could mean that some mortgage lenders won’t consider you. A lot of them like to see you contracting for a period of time – it may be one or two years, typically, or six months. If you’re jumping straight into contracting, it can be more of a challenge to obtain a mortgage.

It’s not impossible. It’s where someone like ourselves can help. One way around it is if you have experience in the industry, but this is your first time contracting. You might have been doing the job for a few years, but not under a contract. In that case, a lender will be comfortable that you know what you’re doing.

How do lenders calculate a daily rate contractor’s annual income?

It varies by lender. A lot of banks approach this by looking at how many days a week you work and multiplying your daily rate by that number. They then multiply that by 46 or 48 weeks, depending on the bank. It may be slightly less.

They know you’re not going to be working 52 weeks of the year. They allow around six to eight weeks for time off or gaps between contracts.

Some banks approach it differently and take your income from your tax returns. If you’re technically self-employed or working under a limited company, they may look at your tax calculations and tax year overviews. They’ll be looking at what you draw from the business rather than what you actually get paid from the contract.

It also depends on how much you’re earning, as well. Some banks have a tipping point, where if you’re earning less than £60,000 or £65,000 a year, they might assess you one way. If you’re more than that, they might assess it differently.

What if my partner is on PAYE?

It’s quite common to do a joint application, where you’re contracting and your partner’s on PAYE and employed permanently. We would need to understand how long you’ve been contracting for, what your daily rate is and your documents.

For your partner on PAYE, we would need three months’ payslips. The slight difference here is that the lender may be a little more lenient on the application because they’re not just relying on your contracting income. You’re buying with someone who’s permanently employed. But in terms of the process, it’s still very much the same.

What if I need to remortgage? Does it differ if you are a contractor on a day rate?

If you’re remortgaging from one bank to another, you will be treated as a new applicant. Whether you’re buying or remortgaging, they generally assess affordability in the same way. They’ll look at the same documents and check you meet their policy and criteria.

Whether you need to remortgage, or you’re buying or moving, the process of getting a mortgage is generally the same – including the documents required and how much you can borrow.

What if I have bad credit as a contractor on a day rate?

Having bad credit as a contractor can create its own challenges. It means the pool of lenders you have access to and the mortgage options are more limited.

It’s not impossible. If you’ve got missed payments or defaults or you were declared bankrupt many years ago, there could be some options for you – some lenders will accept this. We can help you understand who those lenders are.