Contractor Mortgages and the Gig Economy
Over a million people in the UK work in the “gig economy”. These people are working on short term contracts and as such are not entitled to some of the benefits permanent employees might. For example, they are typically not paid for sickness or holidays. Contractor mortgages and ones for those working in gig economy workers are harder to get as they treat you as self-employed.
If you’re a contractor, or work within the gig economy, and looking for a mortgage here are some tips.
Whatever your circumstance, you need to give yourself the best chance of having your mortgage application accepted. To do this, you need to build up a track record of employment, usually with one year’s history unless your contract has a very long time to run.
Types of Employment or Business
If a lender decides to treat you as a sole trader, you will need to produce evidence of your net profit. That is the amount you have earned minus your expenses. Sometimes, people who are self-employed use an Accountant to help them, but make sure to explain your goals to them. Otherwise, they might try and reduce your tax liability which might make it look like you have earned less.
If you have set up your own Limited Company, then most Lenders will be looking at the salary you have paid yourself plus any dividends declared.
Even if you’re on a zero-hours contract, it is still possible to get a mortgage. Again, lenders will be looking at your 12 months’ earnings and will take an average from this.
Lenders are now starting to be more flexible in how they assess contract workers as this part of the economy continues to grow. As such, if you have been operating in this way for a while and have a current contract, then it is possible some lenders will assess your income based on your “day rate”. This is then converted into an annual wage by multiplying by 5 (days) and then by 46 (weeks). This is because they are aware that a Contractor is unlikely to work 52 weeks a year.
Organisation is key. In the same way that it’s a good idea for self-employed applicants the same applies in the gig economy.
No one likes paying more tax than they must but remember, if you are wanting to apply for a mortgage, lenders will want to see healthy levels of sustainable earnings.
If you’re confused or worried about attaining contractor mortgages as a member of the gig economy, make sure to speak to a Mortgage Advisor and build up a relationship well in advance if you can. The better they understand your individual needs, the higher the quality of their advice.