What do we mean by a day rate contractor?

Yes, a contractor on a day rate can get a mortgage. As a contractor on a day rate pay, lenders see you as self-employed or a contractor. So when your application gets to their table, they check consistency of your income, the demand for your skill, contract history, and continuity.

There are different categories of day rate contractors with the two most popular being category by employment structure and contract types.
The category by employment structure is divided into 3: limited company contractor, umbrella company contractor, and sole trader. While the category by contract types is divided into 2: the inside IR35 contractors and the outside IR35 contractors. 

To simplify this for you, if you want to work with us and want the best deal, just come with documents that will show us that you can actually afford the mortgage, that you have a reliable income, and that your income will continue. And by this, I mean your payslip and contract if you're being paid through an agency; your payslip and contract if you're working through an umbrella company; your contract or account if you're working as a limited company; and your SA302 and account if you're working as a sole trader.

Even if you've just recently gotten your job, you can apply for a mortgage, but your best bet is working with a specialist mortgage broker because most high street bankers will most likely reject you. If you work with a specialist like James Wong, what we really want to see in you is the consistency of your income. If you have evidence of past contracts that shows that you've done this type of job before for over a year or just one year, and your current contract is at least for a year or more, then we will definitely find you a lender.

Where things can get a little bit complicated is where you just got a contract and you do not have a work history. Or you've got a work history but your contract is only for 3 to 6 months. The key to success here is having a work history where you've earned a similar amount or more, and having a current contract that will fit at least a year (12 months).

What most lenders do is that they multiply your day rate, days per week, and weeks per year all together to arrive at your annual income.

To ensure their calculation is as accurate as it can be, they assume you won't work for the whole days and weeks in a year, so they use 5 days and 46 or 48 weeks for their calculation.

For example: As a plumber, you earn £450 per day, and work 5 times a week.

If your lender's calculation is based on 46 weeks a year, your annual income will be:
£450 × 5 × 46 = £103,500
For 48 weeks, it's going to be calculated as:
£450 × 5 × 48 = £108,000.

The above calculation is the standard method. But in some complicated situations whereby your contract is less than 6 months or there's large gaps or no clear future contract, your annual income may be cut back by a certain percent depending on the lender.

As a day rate contractor, these days, lenders won't consider you as unstable anymore. Rather, they see you as a professional with predictable income if it's structured properly.

So, if you're applying for a mortgage, what you have to do is provide the same documents as you did for your mortgage. The slight difference is that your lender won't focus on how much you can deposit anymore. Their focus will shift to the loan-to-value of your property.

If you have bad credit, getting a mortgage can be incredibly hard. But that does not mean it's not possible. In situations like this, lenders will still focus on your income, with at least 15% or 25% as deposit. However, in some rare cases, you can be allowed to pay 10% to 15% as the minimum deposit. Then your fate is determined based on the severity of your bad credit. If your credit profile is classified as mild, i.e. late payments, low credit score, or settled default, then you have a higher chance of getting a mortgage. But if you have a severe case like CCJs, IVAs, or bankruptcy, your approval chances are extremely low.

Whatever your situation might be, it's important to always talk to a specialist mortgage broker for tailored recommendation on how best to approach your situation. We have handled clients with bad credit in the past and we would be happy to help you out.

Even though deposit is one of the main factors lenders consider before approving a mortgage for a contractor, it's not the sole determinant of your approval.

There are lenders who accept 5% as minimum deposit and some who only consider 10% to 15% as their minimum deposit. That's why it's crucial to work with specialist mortgage brokers like James Wong with the capacity to get you the best mortgage deal that's within your budget.

Whether you're a first time buyer or you're remortgaging, the situation is almost the same with slight difference. So, the best thing you can do is reach out to us so that we can learn about your situation and provide a tailored solution.

Yes, you can get a Buy-to-let mortgage as a day rate contractor. Lenders don't just assess your personal income alone, they also assess the property's rental income as well.

To get a Buy-to-let mortgage as a day rate contractor, the expected rent must usually cover 125% - 145% of the mortgage payment. Then they will also assess your personal income to make sure you can make up for periods with no tenants. If you're interested in getting a Buy-to-let mortgage, come and have a chat with us. We specialise in helping day-rate contractors secure buy-to-let mortgages by turning complex income into lender-approved applications, quickly, clearly, and strategically.

By bringing your partner into the picture, we are assuming you are interested in a joint mortgage application. If that's the case, your partner who is on PAYE can boost your approval chances. This is because lenders usually consider the income of an applicant who's on PAYE as more stable and predictable than those of applicants who are on a day pay. So what we are going to do is assess your combined income, balance the risk, and structure your combined income so that lenders won't have a choice but to approve your application.

Yes, you need a specialist mortgage broker. This is because most high street banks won't consider contractors on a day pay because of the unpredictable nature of their income. Even most of the ones that will agree to help may agree to do so under strict conditions.

A specialist mortgage broker like James Wong has direct access to lenders across sectors and can go the extra mile to get you the best deal.

One thing about mortgages is that they can be very complex and even if I dedicate a whole blog to answering likely questions, I won't be able to answer all questions.

As a result, I would urge you to kindly reach out to us so that we can discuss your exact situation and provide tailored advice.