Mortgages for contractors
Day rate or weekly rate, on or off-payroll. We work the case on contract value, not the small dividend you take from your company.
Contractor mortgage cases are routinely placed on day rate (or weekly rate) annualised, even where the contractor pays themselves a small PAYE salary plus dividends through a limited company. The lender treats your annualised contract value as gross income, almost like a high-earning employee. The right lender unlocks materially more borrowing than the same case run as a standard limited-company director.
Who this is for
- You contract through a limited company or umbrella, on a day or weekly rate.
- You have a current contract in place and a track record in the same field.
- You take a small PAYE salary plus dividends and retain or distribute the rest.
- A high-street lender has assessed you as a low-income director and underwritten a small mortgage.
Contractor underwriting is a separate lender appetite from standard limited-company-director underwriting. The lender annualises your day rate over a set number of working weeks each year and treats that figure as your gross income. The working weeks used vary between lenders. They do not look at the salary or dividend you actually drew. The case can produce borrowing based on a multiple of that annualised figure, and the multiple varies between lenders.
Day rate, weekly rate, and how it is annualised
Most contractor lenders annualise the day rate over a set number of working weeks. As an illustrative example only, a £500 day rate might annualise to roughly £115,000 to £120,000 of gross income, and a £700 day rate to roughly £161,000 to £168,000. Some lenders use 47 or 48 weeks; others 46. The lender pool narrows on rates above £1,000 a day but the case is still placeable.
What the lender wants to see
A current signed contract showing the day rate and the engagement period. A reasonable history of contract income, often two years of self-employment plus a CV showing the same line of work for longer. A short remaining contract is fine if there is a track record of consecutive contracts. New entrants to contracting from PAYE employment in the same field are usually placeable from day one.
Inside IR35 and outside IR35
The lender pool is similar for both, but inside-IR35 contractors operating through an umbrella with PAYE deductions can sometimes be assessed simply on PAYE income (gross up to the umbrella margin). Outside-IR35 contractors with their own personal service company are nearly always assessed on day rate annualised. We pick the route that produces the bigger borrowing figure.
Worked example
Contractor on a £600 day rate, signed contract through to month nine, three years of similar contracts. Day rate annualised at 47 weeks gives £141,000. A 4.5x multiple lender produces £634,500 of borrowing. Run the same person as a standard director (small salary plus dividend), and the figure could be half that. Same earner, very different mortgage.
Common pitfalls
Gaps between contracts longer than 6 to 8 weeks raise underwriting questions. Single very-short contracts (under 3 months) are harder to place. Switching career fields in the most recent contract narrows the lender pool. A change to umbrella with significantly lower take-home complicates matters. We brief you on all of these before AIP.
How Major Money Matters helps
Specific things we do for this case type. No generic platitudes.
Pick a true contractor lender
A handful of lenders genuinely underwrite on day rate annualised. Most do not. We know which is which.
Document the contract trail
Current signed contract, prior contracts, CV. We package the case so the underwriter sees a clean track record.
Compare day-rate and director routes
For some contractors the standard director route is bigger. We model both before recommending.
Handle umbrella and inside-IR35
PAYE-via-umbrella contractors can often be placed as employed. We pick the cleaner route.
Frequently asked questions
How is my income calculated as a contractor?
The day rate annualised over a set number of working weeks each year, treated as gross income. The working weeks used vary between lenders. The lender does not look at the salary or dividend you took from your limited company.
Do I need two years of contracting history?
Most lenders ask for one to two years. Some accept new entrants from day one if you have prior PAYE employment in the same field. The shorter the history, the more important the contract length and rate.
Inside IR35 or outside IR35, does it matter?
Outside-IR35 contractors are almost always assessed on day rate. Inside-IR35 contractors can sometimes be assessed as employed via the umbrella PAYE figure, which can be cleaner. We pick the bigger route.
My contract has only three months left. Will lenders look?
Yes, with caveats. A short remaining contract is fine if there is a track record of consecutive contracts and a CV that supports continuity. A short single contract is harder.
Can I include my partner's employed income?
Yes. Joint applications with one contractor and one employed applicant are common and often the cleanest route. The lender will assess each income on its own method.
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Talk to a contractor mortgage specialist
A quick 15-minute call tells you what your day rate annualises to and which lender will fund the case.
Named adviser, wherever possible. No call centre. We aim to return your call as quickly as we can. Mon to Fri 9am to 5pm, weekend appointments on request.