Mortgage Basics for Self-Employed Contractors
DIRECTOR AND MORTGAGE ADVISER
Specialist broker for high-earning professionals and complex income cases.
Being self-employed shouldn’t make it harder to get a mortgage — but it often does. And for contractors, where income can vary month-to-month and structure differs from traditional employment, it’s easy to hit roadblocks with lenders.
Whether you work through a limited company, umbrella payroll, or on a day-rate basis, the key is understanding how lenders assess your income and how to present your application properly.
In this guide, we cover how contractor mortgages work in the UK, what lenders look for, and how to position yourself for a successful approval.
Request your fee free mortgage consultation today. No obligation, just sound advice.
What Counts as a Contractor for Mortgage Purposes?
Lenders may treat you as a contractor if you:
Work on short- or medium-term contracts, typically 3–12 months
Are paid a day rate or hourly rate
Operate through a limited company, umbrella company, or as a sole trader
Work in fields like IT, construction, engineering, finance, or consulting
Contractors are generally seen as different from sole traders or business owners — even if they are technically self-employed — and some lenders have specific contractor policies.
How Lenders Assess Contractor Income
There are three main approaches depending on your structure and the lender:
Day-rate contractors
Many lenders will calculate your income using your contracted day rate — not your company accounts or tax returns.
A typical calculation might be:
Day rate × 5 days × 46–48 weeks = Annual income
For example:
£600/day × 5 × 46 = £138,000 gross annual income
This approach is often more generous than using salary + dividends.
Limited company directors
If the lender doesn’t have a contractor policy, they may fall back on the traditional self-employed method:
Use salary + dividends drawn from the company
Average income over the last 2 years
This can penalise contractors who retain profits or had fluctuating income.
Sole traders or umbrella employees
Umbrella contractors are usually assessed like employees (using payslips). Sole traders are treated like any other self-employed borrower — lenders typically want:
2 years of SA302s (tax calculations)
Tax Year Overviews showing declared income
Possibly an accountant’s reference
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How Long Do You Need to Be Contracting?
This varies by lender — but the good news is, you don’t always need 2 years.
Some lenders accept as little as 3–6 months contracting experience, if you’ve worked in a similar role previously
Others want to see a minimum of 12 months contracting history, or a 12-month contract
If you’ve had gaps between contracts, you may need to explain them
Your track record in the industry is often just as important as time spent contracting.
Key Documents You’ll Need
To support your application, expect to provide:
Your current contract (and previous contracts, if applicable)
Last 3 months of payslips (umbrella) or invoices (Ltd Co)
Business bank statements (usually 3–6 months)
Personal bank statements
Tax calculations (SA302s) and Tax Year Overviews (if using self-employed method)
Possibly an accountant’s reference
Presentation is key — the right broker will ensure your income story is clear and complete.
Speak To An Expert Today
Get in touch for a fee free, no-obligation chat about how we might be able to help you.
Tips for Strengthening Your Application
Know your lender – Not all banks treat contractors the same. Some apply PAYE rules; others use day-rate calculations
Prepare documents early – Contracts, tax returns, and bank statements should be clean, consistent, and readily available
Minimise gaps – Short breaks are fine, but multiple long gaps between contracts may raise questions
Use a broker experienced with contractor mortgages – Especially for day-rate structures or newly self-employed clients
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Conclusion: Contracting Doesn’t Mean Complicated
With the right guidance, contractors can access excellent mortgage deals. The key is working with a lender who understands your income structure and a broker who knows how to present it.
Looking for mortgage advice tailored to your contracting setup?
We work with high-earning contractors across IT, finance, and consulting to secure competitive deals — even with short histories or complex income.
Request your fee free mortgage consultation today. No obligation, just sound advice.
FAQs
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This depends on how your income is assessed. If your lender uses your day rate, borrowing could be based on your gross equivalent salary. Expect up to 4.5–5.5x annualised income, subject to affordability.
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Not always. Some lenders accept 6–12 months of contracting, particularly if you’ve been in a similar role previously.
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Lenders may still help — especially if your contract is in the same field and your day rate reflects your previous salary. Proof of continuity is key.
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Some lenders will consider retained profit in your Ltd company accounts — others won’t. It depends on their underwriting policy.
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Umbrella contractors are often assessed like employees — lenders will review your gross payslips over the last 3 months, plus contract details if available.
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APPROVED BY THE OPENWORK PARTNERSHIP ON 15/07/2025