Mortgage for New Contractors

Podcast approved by The Openwork Partnership on 07/07/2025.

How long do you have to be a contractor to get a mortgage?

The simple answer is that it will depend on the bank or building society you’re applying with. They all have their own criteria and rules.

In terms of how long you have to be a contractor to get a mortgage, it can be anywhere from two years to one day. Some banks require you to have two years’ experience in contracting or even two years on your current contract. Others will take you on the first day of a new contract, with no experience – although there are other rules and criteria to meet.

Can you get a mortgage with one year of self-employment?

Absolutely. As a contractor, some banks view you as just self-employed and their criteria will often be two or three years’ self-employment records – so they’re not necessarily suitable for you as a new contractor.

Other banks and building societies will look at you differently. You’re not the same as a self-employed tradesperson or someone setting up a shop, for example. You’ve got a guaranteed contract for a certain period of time, so there’s less risk, volatility and fluctuation in income.

It just depends on whether you meet the rest of the criteria around credit scoring and income. So if you’ve been contracting for one year, absolutely there are options available.

How do you assess affordability for new contractors?

This can really vary from lender to lender, as it depends on how they assess your income. Affordability is essentially how much you can borrow based on your income and outgoings.

Lenders might look at your payslips or a copy of your contract. You might charge a day rate or be paid via an umbrella company, and there are many different routes to how you’re assessed.

For day rate contractors, most lenders will multiply that rate by five, to get an income for your working week. Usually they’ll times that by 46 or 48 weeks to annualise your income – and that can work quite favourably for a lot of contractors. They don’t take the full 52 weeks of the year, because they understand you probably need a holiday.

Speaking to a specialist mortgage advisor in contracting can help you understand what your borrowing capacity is from multiple lenders, as this can vary widely.

What deposit do I need if I’m a new contractor?

You can get a mortgage with a 5% deposit, although your options are more limited as a new contractor. It will depend on how long you’ve been contracting, the terms of your contract, how long it is, the industry you’re in and your experience in that area.

You could find a mortgage with a 5% deposit, while others might require 10% or 15%. As long as you’ve got a good credit score, your income’s good and you meet the criteria, a new contractor can get a 95% mortgage with one or two banks and building societies out there.

How much can I borrow as a new contractor?

This echoes the earlier question in terms of lender variation in how they assess your income and what you can borrow. Generally, they would take your annual income and multiply it by four or five.

But that’s what differs a lot with contractors. As of today in June 2025, we can go up to six times income, especially for First Time Buyers.

Can I use projected income or only historical earnings?

As a new contractor, you can use projected income with some banks – as long as you can provide a copy of your contract, and the package, pay, terms and length of that contract are very clear.

If you’re on the first day of a new contract, as long as you meet the criteria around it, some banks will give you a mortgage. I’ve arranged mortgages for contractors that haven’t yet received any income, but the bank’s been happy to use the contract as evidence.

It’s just about having a chat with a broker so they understand everything else around your circumstances, and can make sure there’s no other reason why you wouldn’t qualify.

How important is my credit score as a new contractor?

As with all mortgages, credit score and your credit history is important. Have you made payments on time? Are you on the electoral roll?

There isn’t an advertised magic score that all these lenders accept – and it does depend on what credit agency you look at.

If you’ve got the odd blemish on your credit file or you feel you might have bad credit, get a copy of your credit report as early as possible. That will better prepare you and help increase your chances of approval.

It’s important, but credit score isn’t the be-all and end-all. If it’s low, it doesn’t necessarily mean you can’t get a mortgage. If you’ve missed payments or anything else, it might be more complicated or more difficult, but it’s definitely not impossible.

What income documentation do you require from new contractors?

Often it’s about whether you’ve had experience of contracting before and any previous contracts you’ve had. If this is your first time contracting, lenders want to understand what industry you were in before. Was it the same line of work, or is this a new industry and role?

Any experience, previous employment contracts or payslips to evidence that would put you in a slightly better position. But if you’re just entering into a new contract and have previously been in fixed-term contracts, best practice is to gather those contracts for the last two years. That would open up your options with a few more lenders.

Other documents are standard, really – the last three months’ personal bank statements, a copy of your ID, proof of address and credit report, just to prove you don’t have any non-disclosed commitments. We would also review your credit profile over the last six years, to look for any missed payments or anything else that might concern a lender.

Generally, that would be enough for a broker like us to review your options and apply for an Agreement in Principle.

Do I need tax returns and SA302s? How many years’ worth do I need?

I’m not a qualified accountant, but whether you submit tax returns depends on your circumstances. As an example, we have clients on fixed-term contracts who have a payslip and pay their tax at source, which is similar to normal employment.

Others might charge a daily rate and don’t pay their tax at source – they have to pay their tax at the end of every year. It’s highly likely that the latter will need to submit tax returns, but speak to an accountant if you’re unsure. They will help you understand whether you need to submit self-assessments.

Most lenders do require two years’ self-assessment tax return documents and will take the average of the two years. A few, not many, would just take the one. So if you just have one year’s self-assessment that might not necessarily be an issue.

Will you consider my accountant’s reference instead of full accounts?

There are banks that will consider this. Most banks want specific documents but some will accept a certificate completed by an accountant, or an accountant’s reference.

They usually ask for specific information, and often a template is provided – we can send that to your accountant and gather the information needed. You might be able to provide the information in other ways, depending on the lender.

How long does the mortgage approval process typically take for new contractors?

There are no direct differences for a contractor. All mortgage lenders vary on how long they take to approve your mortgage, and one of the key differences might be in the preparation. You might be asked for more documents than someone who’s employed or not contracting – such as copies of your last two years’ contracts and tax returns for the last two years.

They might want to see a longer history and details of what your future contracts look like. Is there six months remaining on your current one?

Again, this is where a broker who specialises in contractors can help – we’ll ensure you prepare those documents in time to speed up that mortgage approval process.

Are there any common pitfalls for new contractors applying for a mortgage to be aware of?

The main pitfalls I see are gaps between contracts. There is a limit to what lenders will accept if you’re not going straight from one contract to another. Often anything over four or six weeks can cause issues if they’re in the last two years.

Another key area is how long is left on the current contract. If you’ve got less than three months left on it, lenders may ask for something in writing from your employer to confirm they will be renewing it. Or, they might want a new contract as evidence.

A frequent pitfall is just not knowing the lender’s policy and that you need a certain level of experience or contracting history in order to apply. If you’re coming out of a permanent employee position into a new contracting role, you’ll be turned away by most banks. You can end up wasting a lot of time and feeling quite defeated.

But don’t just give up, speak to an expert like us and explain your goals. We’ll ask questions to establish your circumstances and make recommendations.

What else do we need to know about mortgages for new contractors?

Preparation is really key – whether you’re buying your first home or remortgaging. You may have approached your bank and found you can’t get anywhere near the borrowing you need, or they can’t offer you a mortgage because you haven’t been contracting for long enough.

Don’t be disheartened. There are so many different options out there and each bank looks at contractors in so many different ways. Just because there’s a no from one, it won’t be a no from everyone.

Just have a conversation as early as possible with a broker who specialises in contractors. We’ll help you understand your options and the documents you need.

For specialist tax advice, please refer to an accountant or tax specialist.

Approved by The Openwork Partnership on 07/07/2025.