Contractor Mortgages & The Gig Economy

Contractor Mortgage Advice

There are over a million people in the UK alone working in the “gig economy”. These people are working on short term contracts and as such are not entitled to some of the benefits permanent employees might have. For example, they are typically not paid for sickness or holidays. 

A large percentage of this type of workers are operating in professional services, some are skilled or unskilled manual workers and with the uptake in online shopping many are couriers. 

Increase Your Chance at Mortgage Application Success

It is more difficult for gig economy workers to get a mortgage as they are sometimes treated by Lenders as being Self Employed.

To give yourself the best possible chance of getting a mortgage in these circumstances you will need to build up a track record of employment. You will probably need one year’s history to qualify for a mortgage unless your contract has a very long time to run. 

If a Lender decides to treat you as a sole trader you will need to produce evidence of your net profit. That is to say the amount you have earned minus your expenses. You may need an Accountant to help you with this. 

If you have set up your own Limited Company then most Lenders will be looking at the salary you have paid yourself plus any dividends declared. 

Mortgage Lender Flexibility

Lenders are now starting to be more flexible in how they assess contract workers now that there are so many of them in the economy. If you have been operating in this way for a while and have a current contract then for some industries they will consider assessing your income on your “day rate”. 

Lenders that assess on day rate will typically times that day rate by 5 then by 46 weeks. They know that a Contractor is unlikely to work 52 weeks a year even if they are not paid for holidays! That is where the 46 weeks comes from.

This method really works well for IT Contractors who tend to pick and choose which contract to take. They will often refuse contracts until a “bigger fish” comes along. 

Self Employed Mortgage Advice

In the same way, as it’s a good idea for those looking to take out a Self Employed Mortgage. These Self Employed applicants need to get organised in advance before they think about applying for a mortgage the same applies in the gig economy.

No one likes paying more tax than they have to but remember if you are wanting to apply for a mortgage then Lenders will want to see healthy levels of sustainable earnings. Speak to a Mortgage Advisor and build up a relationship well in advance if you can. 

In terms of zero-hours contracts, it is possible for this type of applicant to get a mortgage too. Again, Lenders will want 12 months’ earnings before you can apply and will consider taking an average of your earnings over a full year. 

Written by
Malcolm Davidson
Managing Director of UK Moneyman Ltd.
MAQ & CeRER Qualified

22nd April 2024

About the Author

Malcolm Davidson

Managing Director of UK Moneyman LTD

Malcolm is one of the UK’s most well-known and respected Mortgage Advisors. He is passionate about providing a 5* customer experience and he has also trained and mentored dozens of fellow Advisors in a career that is now in its third decade.

In addition to his day to day duties as Managing Director, Malcolm still gives out mortgage advice and feels lucky that his job is also very much his hobby.

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