Consultant Contractor Secures £1.1m Purchase Using Day-Rate Assessment at 75% LTV
A management consultant operating via a personal service company secured a £1.1m residential purchase using day-rate assessment, despite a recent contract gap and IR35 scrutiny.
Client Snapshot
Profession: Management consultant (PSC contractor)
Location: England (UK)
Property Type: Residential house
Purchase Price: £1,100,000
Day Rate: £650 per day
Deposit: 25%
Loan-to-Value: 75%
Key Considerations:
Two-month contract gap in the previous year
IR35 and umbrella deductions
Mainstream lender required
Context
The client was an experienced management consultant working on a day-rate basis through a personal service company. Income was strong and consistent over time, but contracting naturally involved periodic gaps between assignments.
The objective was to secure a mainstream residential mortgage using day-rate assessment, rather than relying on salary and dividends, while ensuring the application reflected continuity of work and current trading position.
The Challenge
Many lenders apply strict rules around acceptable contract gaps, often limiting them to short periods unless clearly explained. In this case, a two-month break in the previous year required careful positioning.
In addition, the application needed to satisfy IR35-related scrutiny and ensure that umbrella or PSC deductions were not double-counted when assessing affordability.
Without precise lender selection and clear evidence of continuity, the case risked being down-weighted or declined.
Lender Strategy
Lenders were assessed based on their treatment of day-rate contractors, acceptable gap policies, and experience with IR35 considerations.
Affordability was modelled using a standard day-rate methodology aligned with mainstream policies, while alternative calculations were sense-checked where lender multipliers vary. The contract gap was documented as a planned pause between assignments, supported by historic contracts and current engagement evidence.
The selected lender was comfortable assessing contractors with short historic gaps and had a clear framework for reviewing IR35 status and deductions without penalising sustainable income.
Several lenders were ruled out early due to rigid gap limits or inflexible treatment of contractor income.
What We Can Do for You
Structure day-rate affordability clearly for lender assessment
Position contract gaps in line with lender policy
Navigate IR35 and umbrella considerations upfront
Package contractor applications to minimise underwriting queries
The Result
A mortgage was approved with a mainstream lender at 75% LTV, supporting the £1.1m purchase. The application progressed smoothly with no re-work required following initial submission.
Why This Matters for Similar Clients
Contractors often assume that recent gaps or IR35 scrutiny will restrict their borrowing options. In practice, lender selection and how continuity is evidenced are far more important than the presence of short breaks between contracts.
Request your fee free mortgage consultation today. No obligation, just sound advice.
FAQs
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Commonly day rate ×5 ×46 weeks; some lenders vary the week count. Evidence usually includes your contract and bank statements.
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Short gaps are often acceptable; beyond 4–6 weeks some lenders pro-rate income or require extra context. Others accept up to 8 weeks as standard.
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Often yes—many lenders accept umbrella/inside-IR35 cases with the right evidence and deduction treatment.
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3 Feb - Written By David Walsh
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