Contractor Mortgage Daily Rate

Contractor Mortgage Daily Rate

Gary talks to us about mortgages for daily rate contractors.

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

Yes, a day rate contractor could get a mortgage. It’s just a different type of employment. 

A daily rate contractor is someone who has a specific daily rate of pay, and typically pays their own tax and national insurance. Sometimes they’ll pay themselves via an umbrella company.

In most cases, these are people who hold a contract for a limited period, where they’re paid based on the days that they work and have a specific rate for each day that they work.

What are the different types of daily rate contractors?

Almost any occupation could be on a daily rate contract, but most commonly we find them in IT and a few other fields. An IT contractor will often have a day rate contract for three, six or 12 months.

What proof does a daily rate contractor need to provide when applying for a mortgage?

Typically they would need to provide proof of ID and proof of address – such as your passport and a household utility bill dated within the last three months. Proof of address could also be your driving licence.

To prove your income, most lenders will want to see a copy of your contract. They might want to see 12 months worth of contracts and also your bank statements. If you are set up as a limited company, typically they’ll want to see company bank statements to show the turnover ties up with the contract.

What if I have only recently become a contractor?

This could be completely fine – it will vary from lender to lender. If you’ve only recently become a contractor, it will probably come down to what you were doing prior. If you worked in the same line of business, a lot of lenders are absolutely fine with that. 

Our job is to help you find the right lender for your circumstances. So that’s always worth talking to us about.

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

Again, this does vary from lender to lender, but the way most lenders calculate an annual income from a day rate contractor is to take the day rate, multiply that by five days to get a weekly rate, and then multiply that by 46 weeks to get an annual figure.

They tend not to calculate it based on 52 weeks, as they assume you will either have some time off for holiday or take a gap between contracts to rest and recuperate.

What if I need to remortgage as a day rate contractor? 

This is no problem. We essentially do the same research and we’ll have the same options as you for a purchase. Obviously, other things will get taken into account. 

If you are remortgaging, you could potentially be better off with staying with the same lender with what’s called a product transfer, or it may be more beneficial to remortgage with another lender. We’ll work out what the most appropriate option for your circumstances is.

What if I have bad credit as a day rate contractor looking for a mortgage?

There’s a broad spectrum of lenders we could go to, including many specialist lenders. With adverse credit, it comes down to what’s been registered, when, the value, if and when it was settled. 

If you’ve got ongoing bad credit, it’s important to get that up to date, keep it paid up and then stay within any prescribed limits on credit cards or an overdraft.

Having bad credit on its own won’t exclude you as a contractor from getting a mortgage. But it is really important to talk to us, give us as much information as you can about that adverse credit, and we’ll work with you to find that most appropriate option.

What if I have a small deposit?

Again, there’s a multitude of lenders available, who do have deposit levels as low as 5%, which is typically the minimum required deposit. It shouldn’t make any big difference you being a contractor in getting a mortgage.

What if I’m a First Time Buyer and a day rate contractor? 

As you might imagine, the answer is very much the same. There are lots of different lenders, so come and chat with us about your circumstances. Give us all that background and let us do the legwork to find you the most appropriate lender. 

Whether you’re a First Time Buyer, a second time buyer or a remortgager, the more we know about your situation, the more likely we are to be able to find the right option for you.

Can I get a Buy to Let mortgage as a day rate contractor?

Yes, you could. All we need to do is work out your income, as the lender would normally assess that in the same way as a residential mortgage. As long as you meet that minimum income criteria, it’s the same process as usual. 

If you are looking at a Buy to Let mortgage as a contractor, come and have a chat with us. Again, we could guide you on the most appropriate option for your circumstances.

What if my partner is on PAYE?

Each applicant’s income is assessed individually. We’d assess their income separately from yours and then use those combined incomes to find the most appropriate option. 

In terms of the joint applicant being PAYE – or even self-employed as a daily rate contractor or any other type of employment – it might just mean we choose a different lender in finding the most appropriate option for your circumstances.

Do I need a specialist mortgage broker to help me if I’m a day rate contractor?

I wouldn’t say you need a specialist, but it’s really important to have someone who is knowledgeable in the field. There are some specialists out there, but in all honesty, I’m not sure they know any more than an experienced mortgage advisor. 

Ultimately, you need somebody who is knowledgeable, knows their way around contracting, and could access the greatest number of options in finding a deal that suits your circumstances most appropriately.

What else do we need to know about getting a mortgage as a day rate contractor?

It’s really about coming and talking to us. We want to hear about your circumstances so we could help.  We can’t always promise the answer you’ll get is the answer you always want, but we could promise it will be well researched. We’ll look into as many options as possible. 

I’m confident in our advisors to say that if we can’t do it, no one could..

MOST BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.