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Zero Hour Contract Mortgage

Zero hour contract mortgages with Paul Mizon.

What is a zero hour contract mortgage?

It’s not a specific type of mortgage. It’s more about the lender’s criteria. Some lenders will allow zero hour contracts, and you will get the same range of products as anyone that is employed or self-employed on more traditional contracts.

You won’t be penalised for having a zero hours contract, but you will have a reduced choice of lenders.

Is it possible to get a mortgage if I work on a zero hour contract?

Yes. It depends how that’s made up and how long you’ve been doing it, which I’m sure we’ll get into a bit further on.

How much deposit do I need for a zero hour contract mortgage?

As with traditional mortgages, they can literally start from 100%. There is a 100% product out there at the moment – but it’s a very specific scheme. For most people the minimum is typically 5%.

Can self-employed workers on zero hour contracts get a mortgage?

Yes – although typically, self-employed workers wouldn’t be on a zero hour contract. Zero hour contract workers usually get all the benefits that PAYE employees do – they’re just not guaranteed set hours per week.

You wouldn’t normally come across that with self-employed people – but where it does happen we would look at your earnings in the latest year.

How do lenders assess income for zero hour contract mortgages?

It ranges – some will want to see a P60 and will want proof that you’ve been on zero hour contracts for a certain number of months or years. Typically they look for you to have at least 12 months’ experience on this type of contract.

Some will take an average of your last three months’ income, while others will want every single payslip for the last 12 months. With the more straightforward ones, if your latest few payslips back up your P60 figure, that’s what they’ll use.

How much can I borrow when working on a zero hour or temporary contract?

It depends how much you earn. The typical loan to income multiple is 4.5 times. It’s changed a lot recently with increased interest rates and stress tests in the background.

You can get as much as five 5.5 times, but it does depend on what you earn. If your income is higher you’re more likely to get the higher multiplier, if it’s lower you’ll probably get a little bit less than even the 4.5 times.

Can I use benefits as income when applying for a zero hour contract mortgage?

Yes, there are lenders that allow you to use benefits alongside a zero hours contract. Most lenders don’t like benefit income being more than 50% on the application. However, we do have lenders that solely use benefit income if required. So you can definitely use benefits alongside a zero hour contract.

How does my age impact my eligibility when applying for a mortgage as a zero hour contractor?

It doesn’t really have an impact that’s any different from other mortgage applicants. You will still be bound by the same limitations, in that if you’re a bit older you may need a shorter term in line with your retirement age. If you’re a bit younger, you can benefit from a longer mortgage term, as required.

What is the maximum loan to value ratio for zero hour contract mortgages?

The maximum is typically 95%. There are some other options as I said before. The lower the loan to value, the lower the credit score that’s required. So it can be beneficial to go a bit lower if you’ve got a few credit blips – it will make your case a bit stronger.

If they’re a bit concerned about all the income being on a zero hour contract, a lower loan to value can mean you’re viewed more favourably.

Will I have to pay more on my mortgage as a zero hour contractor?

There is one specific contractor product out there, and it is a little bit more expensive. But typically you’ll qualify for the same product ranges across most mortgage lenders.

How likely is it that I will be successful in obtaining a mortgage while having a zero hours contract job?

To see how likely you are to be accepted for a mortgage before applying, speak to an adviser. You can get an Agreement in Principle where we run your details through with a lender. Typically they do a soft credit search – sometimes it’s a hard search.

The lender will come back and give us a decision that, subject to underwriting, they can proceed with a mortgage for you.

We will know what we’re looking for. For example, to successfully obtain a mortgage with a zero hour contract, a lender is looking for stability. We’ll ask what you’ve done before and for a lot of payslips and P60s etc. We’ll get that upfront to give you the best possible chance. So speak to your broker and – we’ll be your dedicated expert to help you proceed.

How can I improve my chances of getting a mortgage on a zero hour contract?

The first step is to speak to a good broker. We’ll outline everything very clearly for you and explain what we’re going to do.

To improve your chances of getting a mortgage on a zero hour contract you will need some history of working in this way – ideally for a year. The better the deposit and having all your documents to hand is always very helpful as well.

Usually lenders want to see income from your payslip matching up with your bank statements. Just make sure you’ve got everything ready – that will help your broker. But ultimately we’ll guide you.

What is your experience with zero hour contract mortgages?

I’ve done many of them during my career. Many moons ago, I had a zero hour contract myself for one of my jobs – and people I worked with then had mortgages.  Once I became a mortgage adviser later in life I’ve had many clients come through who are on a zero hours contract.

We’ll get your last 12 months payslips to put us in the best position and open up all lenders to us. Then we’ll get your Agreement in Principle, so we know what income we’re using and what borrowed amount you’re likely to be able to achieve.

What role does an expert broker play in applying and getting a mortgage on a zero hour contract?

A broker is key. Very recently I’ve had one zero hour contractor come to me who went to their bank direct, had an appointment, waited two weeks for it and then sat down for two hours – only to be told they can’t proceed.

They’ve come to me and in fact I’ve placed them with the very same bank – just through knowing exactly how to position it with them. I’ve been through all the pay slips myself. The bank had taken everything the client said at face value and then declined them at Agreement in Principle stage.

Without a broker things can be very confusing. You are more limited with the lenders  and popping into a bank or applying online is unlikely to work.

A broker will save you lots of time. Plus, if you go into various different banks and they do hard credit searches, you can soon start damaging your credit score. So it’s much less risky to let a broker do it all for you.

Where can I find more mortgage advice for zero hours contract workers?

You can get lots of information from brokerage websites and some will have relevant sections for you like The Mortgage Store – but the easiest thing to do, honestly,  is speak to a mortgage broker.

We’ll be able to advise you on all your concerns. The first thing a client will ask about is whether their income is steady enough and what the lenders look for. It’s breaking down what we’re going to need and then you can relax, knowing the route forward.

How can I speak to an expert for advice on getting a mortgage on a zero hour contract?

You can call in to us, or we’ve got a live chat function as well. We’re more than happy to deal with anyone, obviously, for any mortgage. But particularly if you’re on a zero hour contract, we’ve got lots of expert advisers who are ready to help you.

Your home may be repossessed if you do not keep up with your mortgage repayments.