5 Myths About Getting a Mortgage on a Day Rate
Speak to An ExpertCustomers love us! Don't take our word for it. Check out what some of them have to say...
5 Myths About Getting a Mortgage on a Day Rate
(And How to Beat the High Street)
Getting a mortgage shouldn’t be harder just because you don’t fit into a standard 9-to-5 job. Yet, many contractors, freelancers, and limited company directors face frustration when approaching high street banks. The automated systems used by traditional lenders often fail to understand dividend structures, retained profits, or day-rate income. This can be especially irritating when requiring specialist first-time buyer mortgages for contractors.
Also, remortgaging on a day rate comes with its own challenges…
This lack of understanding has given rise to several persistent myths about contractor mortgages. Here, we bust the top five myths and reveal how you can secure the property finance you deserve.
The Reality: While a high street bank clerk might demand three years of audited accounts, specialist lenders take a fundamentally different approach. Many will assess your application based on your current day rate, multiplied across the year, even if you have only been contracting for a short time. As long as you have a track record in the same industry, First-Time Buyer Mortgages and Remortgages are entirely accessible to contractors.
The Reality: Contracting naturally involves taking time off between projects. Specialist lenders understand this reality. As long as the gaps are reasonable, typically no more than 6 to 8 weeks in a 12-month period, and you have a track record of securing new contracts, lenders will view your income as stable and reliable.
The Reality: Securing a mortgage when working through an umbrella company can be tough on the high street, as some lenders view umbrella income as less reliable. However, at Broadbench, we work with lenders who take a modern view and offer competitive products to umbrella company contractors using contract-based affordability models. Your IR35 status does not have to limit your property ambitions.
The Reality: Tax-efficient business owners often pay themselves a minimal salary and take the rest in dividends, leaving profits in the company. Traditional lenders might only look at your personal tax return, drastically underestimating your true earning power. Specialist brokers know which lenders will look at your company’s retained profits and total contract value when calculating affordability.
The Reality: You do not have to pay a premium simply because you are self-employed. By accessing the market through a specialist broker, you can secure the same competitive rates available to permanent employees. The key is knowing which lenders to approach and how to present your case.
Case Studies
Resources
Speak to a Broadbench Specialist
Don’t let high street banks dictate your borrowing power.
Speak with a Broadbench mortgage expert. We’ll bypass the automated systems and find a lender who understands your true earning potential.
FAQs
Can I get a mortgage as a contractor?
Yes. While most high-street lenders struggle to assess contractor income accurately, specialist lenders can assess affordability based on your day rate or contract value. Broadbench works with lenders who understand contractor income structures, helping you borrow in line with your actual earning capacity rather than being limited by payslip-based assessments.
Does IR35 affect my mortgage application?
Yes. Your IR35 status affects how lenders assess your income and which products are available to you. Outside IR35, specialist lenders can use your day rate to calculate affordability. Inside IR35, your gross employment income from your umbrella company or client payroll is used. In both cases, Broadbench will identify the lender and assessment method that gives you the most favourable outcome.
How much can I borrow as a contractor?
This depends on your day rate, contract length, and the lender’s assessment method. Specialist lenders using a day rate assessment will typically multiply your day rate by 5 (days per week) by 46 or 48 (working weeks per year) to produce an annualised income figure, then apply a standard income multiple of 4 to 5 times.
A contractor on a £500 day rate, for example, could have an annualised income assessed at £115,000–£120,000, supporting a mortgage of £460,000–£600,000 depending on the lender and other factors.
I operate through a limited company and take salary and dividends. How will a lender assess my income?
Most high-street lenders will assess only your salary and dividends as drawn, using your SA302 or company accounts. This often understates your income significantly if you retain profits in the company. Specialist lenders using a day rate assessment will bypass this entirely, assessing your income based on your contract rate rather than your drawings. Broadbench will identify the most appropriate assessment method for your specific income structure.
I work through an umbrella company. Can I still get a specialist contractor mortgage?
Yes. Specialist lenders who understand umbrella company income will assess your gross contract value or gross employment income rather than your net take-home pay, giving you access to borrowing that reflects your actual earning capacity. Broadbench works with lenders who take this approach for umbrella company contractors.
My IR35 status recently changed. Does this affect my mortgage options?
It can. A recent change in IR35 status affects how lenders assess your income and may require you to demonstrate a period of trading history under your new status. Broadbench advisers will assess your current position and identify lenders who are comfortable with recent IR35 changes, ensuring you are not penalised for a legitimate change in your working arrangements.
I was turned down by my bank. Can Broadbench still help?
Yes. High-street lenders frequently decline contractor applications because their standard affordability models are not designed for contract income. Specialist lenders assess contractor income differently and are far more likely to approve applications that a high-street bank would decline. Being turned down by your bank does not affect your ability to apply with a specialist lender, and Broadbench will identify the most appropriate lender for your situation.
Do I need a large deposit as a contractor?
Not necessarily. Contractors with a strong contracting history and a current contract in place can access mortgages with deposits as low as 5–10%, subject to lender criteria. A larger deposit will typically unlock better rates and a wider choice of lenders, but it is not a prerequisite.
Ready to secure the mortgage you deserve?
Fill out the form below to arrange a time to speak to a Broadbench adviser who specialises in Contractor Mortgages