Mortgages For Contractors | How To Get A Mortgage On A Day Rate

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Today, we’re joined by Ifthi, a trained accountant and mortgage broker with over 10 years’ experience, and one of the founding directors at WIS.

Q1: Who usually gets paid a day rate?

Gemma: Who typically gets paid a day rate?

Ifthi:

Contractors: Most common group (IT, engineering, advertising, etc.) on short-term contracts.

Agency workers: Some get paid on a day rate.

Zero-hour employees/contractors: Sometimes paid on a day rate.

Q2: How does being paid a day rate affect getting a mortgage?

Ifthi:

It’s trickier than for permanent employees who have regular payslips.

Banks prefer permanent employees because income can be easily verified with payslips and HMRC records.

Contractors may be considered similar to self-employed, but lenders now recognize that contractors have regular work.

Specialist advice is often required for contractor mortgages.

Q3: How do lenders calculate borrowing amounts for day-rate contractors?

Ifthi:

Most lenders use the day rate × 46 weeks (to account for holidays and contract gaps).

Expenses and existing commitments are considered the same as for permanent employees.

This gives a more realistic income assessment for contractors.

Q4: How long do contractors need to have been working before getting a mortgage?

Ifthi:

Day-one contractors can apply, provided they have experience in the same line of work.

Example: An IT specialist moving to IT contracting is eligible.

Experience in unrelated fields may not count.

Probation periods can sometimes prevent immediate approval.

Q5: Does the length of your contract matter?

Ifthi:

Banks usually require at least 6 weeks remaining on a contract at application.

Some lenders may require 8–12 weeks, but exceptions exist for seasoned contractors.

Self-employed route is an alternative if contract duration is short—using tax returns (SA302) or company accounts.

Q6: What if you have multiple contracts?

Ifthi:

Most banks prefer contractors with a single contract.

Some lenders consider multiple contracts (e.g., part-time work at different places).

Self-employed route can also account for multiple contracts and higher income.

Q7: What about contractors between contracts?

Ifthi:

Banks need assurance that gaps are temporary.

Communication with the bank is essential before applying.

Previous examples show banks can accept temporary gaps if explained.

Q8: Does experience in different job roles affect approval?

Ifthi:

Banks prefer consistent experience in the same field.

Different roles may require bespoke underwriting.

Advisors usually communicate with underwriters to get pre-approval.

Q9: How does IR35 status affect contractor mortgages?

Ifthi:

Outside IR35: Day-rate rules apply normally; income × 46 weeks is acceptable.

Inside IR35: More complex—income may be reduced by umbrella company fees; bonuses/commissions may not be fully considered.

Banks have adapted since April, but borrowing amounts may be lower than pre-IR35.

Q10: What about contractors working through umbrella companies?

Ifthi:

Income must account for deductions (umbrella fees).

Bonus/commission treatment varies by lender.

Specialist advice is recommended before applying for a mortgage.

WIS has an accountancy team that can assist with umbrella contractor mortgage applications.

Q11: How do fixed-term contractors get mortgages?

Ifthi:

Day-one fixed-term contractors usually need at least one payslip, sometimes three months’ payslips.

Bonus or commission elements can complicate applications.

Fewer banks operate in this specialist area; underwriting may require common-sense exceptions.

Specialist advice is essential for navigating these rules.

Q12: Any final advice for contractors?

Ifthi:

IR35 changes have affected mortgage rules—outside IR35 is easier, inside IR35 requires planning.

Plan mortgage applications in advance to avoid last-minute issues.

Bonus and commission treatment can impact borrowing capacity.

Always seek advice for individual circumstances; friends’ experiences may not apply.

Disclaimer

These points may not apply to everyone—consult a qualified advisor.

WIS can assist both on mortgage and accountancy aspects for contractors, including umbrella company arrangements.

Mortgages are secured against your home or property and may be repossessed if repayments are not kept up.

Gemma: Thanks again, Ifthi, for your advice. We’ll be back next week with another episode of Let’s Talk Money and Mortgages. Stay safe and see you soon!