A contractor mortgage refers to a standard residential mortgage where the applicant’s income is assessed based on contract earnings rather than traditional employment payslips or self-employed accounts.
Contractors typically work on fixed-term contracts, often through a limited company or umbrella company, with contracts renewed regularly. Some lenders recognise this structure and assess affordability using the contract rate itself.
This approach can significantly increase borrowing power compared to lenders that rely only on salary, dividends, or historic accounts.
How contractor income is assessed
Contractor-friendly lenders may assess income using a contract-based calculation instead of accounts.
This is typically calculated as:
Day rate × days per week × 46–48 working weeks
For example, a contractor earning £500 per day, five days per week, may be assessed on an income of over £115,000 — even if they draw a modest salary from their company.
This method is particularly beneficial for contractors who retain profits within their company or pay themselves tax-efficiently.
Limited company and umbrella contractors
Contractors operating through a limited company or umbrella company can still access contract-based assessments, depending on the lender and the structure of the contract.
Some lenders will use:
- Contract value as primary income
- Salary and dividends as a fallback
- Net profit plus salary for affordability
The difference between these approaches can be substantial. The same contractor may be assessed on dramatically different income figures depending on the lender used.
Choosing the correct route from the start is critical to maximizing borrowing potential.
Contract requirements
Most lenders will require a current contract in place at the time of application.
In many cases, lenders do not require a long remaining contract term. Even short remaining periods may be acceptable where there is a proven history of renewals or continuity of work.
Lenders will typically look for:
- A current contract
- Evidence of contracting history
- Minimal unexplained gaps between contracts
- Consistency within the same industry or role
Deposit requirements and rates
Deposit requirements for contractor mortgages are often similar to those for employed borrowers.
In straightforward cases, contractors may access:
- 90% loan-to-value mortgages
- Competitive fixed and variable rates
- Mainstream residential mortgage products
When structured correctly, contractors are not automatically subject to higher rates or specialist pricing.
Why contractors struggle without advice
Many contractors encounter difficulties because their application is assessed incorrectly at the first stage.
Common issues include:
- Being assessed as self-employed using accounts only
- Branch staff unfamiliar with contractor criteria
- Online applications defaulting to PAYE logic
- Multiple declined applications damaging momentum
A single incorrect decision can limit future options — even when strong alternatives exist.
Why speak to a mortgage broker
Contractor mortgages are not suitable for trial-and-error applications.
An experienced mortgage broker will:
- Identify whether contract-based assessment is available
- Select lenders aligned with your contract structure
- Present income in the most favorable format
- Avoid unnecessary credit searches
For contractors, a short conversation at the start of the process can make the difference between approval and months of frustration.