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Can I Get A Mortgage As A Day Rate Contractor?

Updated: Apr 10



Can I Get A Mortgage As A Day Rate Contractor?

As a Day Rate Contractor, you face unique challenges when applying for a mortgage. Unlike salaried employees, contractors often must go further in proving their income and sustainability.


Despite potentially commanding high daily or hourly rates, you may often find that your income, as reported on your tax return, does not accurately reflect your actual earning potential. This can be due to leaving funds within your limited company (retained profit or earnings), drawing minimal salaries and dividends to minimise personal tax liabilities or offsetting business expenses.

 

As a result, traditional lenders, who assess affordability based solely on taxable income, can significantly limit your borrowing capacity. However, there is good news. Specialist mortgage lenders and brokers exist, who understand the nuances of contractor finances, and can secure mortgages based on your day-rate, rather than just taxable income that show in your company accounts or personal Tax Calculations (formerly known as SA302s).

 

How Do Lenders Calculate How Much They Can Lend You? 


Lenders who consider Day Rate Contractors will look at how much you are being paid per day, how many days a week you work and then apply their own calculation. This is usually assuming you are working 46-48 weeks of the year. Therefore, if you are charging £350 per day and you are contracted to work 5 days a week, a day-rate friendly lender may calculate your income as £84,000; whereas your limited company income will likely be much lower.


One other key benefit versus using standard self-employed income figures, is that a lender may be able to take the figures from your most recent contract, rather than more historic income figures reported on your self-employed income, which can be up to 12 months old. This may be especially helpful if you have increased your income rapidly in the last year.

 

What Documents And Information Will I Need To Apply For A Mortgage?

 

As well as the standard documentation and information, ID, proof of address, bank statements etc, you may also need the following:


  • Copies of your current and previous contracts.

  • A letter confirming any contract extensions which have been agreed.

  • A copy of your CV, showing an overview of your employment track record (preferably including day rates for each contract)

  • Business or personal bank statements showing the income credits from the company you are contracted to.

  • A confirmation from a recruitment agent, confirming you would be able to get a new contract in the same line of work.

 

Other Things To Consider

 


  • You may need to have been a contractor for a certain period. An exception to this may be that you have been in the same line of work, before becoming a contractor, even if it has been as a PAYE employee.

  • Certain lenders have minimum contract amounts to qualify for their contractor policy.

  • You may need to show you have time left on your current contract or a letter from a recruitment agency to show you can easily find another contract in the same field, if required.

  • If you get paid from multiple contracts, you may be treated as self-employed, rather than a contractor.

  • Lender’s prefer minimal gaps between contracts.

 

To Answer The Question, Can I Get A Mortgage As A Day Rate Contractor?

 

Although you are a Day Rate Contractor, there are lenders who can accept this type of income and assess borrowing capacity based on your current daily rate, which will be higher than your tax return income figures. Specialised lenders who are adept at understanding your situation, are important if you are looking to be accepted and maximise what you can borrow.


Consider speaking to a mortgage broker who has experience in placing mortgages for contractors if you are unsure, as they will be able to approach the right lenders and present your case in the best possible way.



 

At MRG Private Clients, we believe in providing our clients with personalised guidance and support when it comes to making important financial decisions. We are based in Medway, Kent but offer our specialist mortgage services nationwide. Learn more about our specialist mortgage services >

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