Contractor mortgages
Contractor mortgages are more accessible than many contractors realise. Some lenders will annualise your day rate rather than relying on accounts, which can significantly boost your borrowing power. This guide explains how contractor income is assessed and what you need to know before applying.
In this guide
What is a contractor mortgage?
A contractor mortgage isn’t a specific product — it’s a standard mortgage assessed using criteria that recognise contract-based income. The key difference is how the lender calculates what you earn.
Many contractors work through their own limited company or an umbrella company, drawing a low salary and taking the rest as dividends. If a lender only looks at this declared income, the borrowing figure can be disappointingly low. Lenders with contractor-specific criteria take a very different approach.
How does the day rate calculation work?
Day rate calculation example
£500
Daily rate
Your contracted day rate
× 5 × 48
Annualisation formula
5 days per week, 48 working weeks (allowing for holidays)
£120,000
Assessed income
What the lender uses for affordability — regardless of what you actually draw
At 4.5x income, this contractor could borrow up to £540,000. Compare that to a salary-plus-dividends assessment on the same contractor’s limited company accounts, which might show £50,000–£60,000 of declared income and a maximum mortgage of £225,000–£270,000.
Umbrella company vs limited company contractors
Umbrella company
- Paid via PAYE — you receive a payslip
- Some lenders treat you as employed (simpler application)
- Income is clear but may be lower after umbrella fees
- Fewer tax planning options
- Easier for mortgage applications with mainstream lenders
Limited company (PSC)
- You control salary, dividends, and expenses
- More tax-efficient but declared income may look lower
- Day rate lenders assess your contract, not your drawings
- Need company accounts and SA302s for non-day-rate lenders
- More lender options if using a broker
CIS contractor mortgages
How does IR35 affect your mortgage application?
IR35 is the tax legislation that determines whether a contractor is genuinely self-employed or effectively an employee for tax purposes. Since April 2021, the end client (not the contractor) is responsible for determining IR35 status in medium and large businesses.
If your contract is inside IR35, you’re taxed as an employee through PAYE. Some lenders will treat inside-IR35 contractors as employed, which can simplify the application. If you’re outside IR35, you’re assessed as self-employed with the income methods described above.
The key for your mortgage application is consistency. If you’ve recently changed IR35 status, lenders may want to understand the impact on your income. A broker can explain this and direct you to understanding lenders.
Contract length and renewal requirements
- A current contract with at least 3–6 months remaining
- History of contract renewals (proves continuous employment)
- Minimal gaps between contracts (under 4–6 weeks)
- Copy of your current contract showing day rate and dates
- Previous contracts or evidence of renewals if available
- CV showing continuous contracting history
If your contract is about to end with no confirmed renewal, some lenders will still proceed if you have a strong history of back-to-back contracts in your field. Others may want to wait until a new contract is signed. Timing your application to coincide with a new or recently renewed contract gives the strongest position.
Get specialist contractor mortgage advice
At Clearview Mortgage Solutions, we work with contractors across all industries — IT, construction, engineering, finance, and more. We know which lenders use day rate assessments, which understand CIS income, and which are most flexible on contract terms.
Contact us for a free, no-obligation assessment. We’ll calculate your borrowing capacity using every available method and find the lender that gives you the best result.
Related guides
More guides in our self-employed mortgage hub.
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