Are you eligible for a mortgage when you’re a temporary worker? Can you even get a mortgage when you’re on a fixed term contract? It can be a little trickier than it would be if you were employed in a permanent position, but it’s totally doable!
To help you sidestep those challenges, we’ve created this short guide to getting a mortgage if you’re on a fixed term contract, you’re an agency worker, or you work in the gig economy. Discover the steps you need to take, how much you can borrow, and the criteria lenders have for fixed term contract mortgages.
How to get a mortgage on a fixed term employment contract
If there’s one thing you should know about mortgage lenders, it’s that they love stability. Lenders try to avoid risk and unpredictability and working on a fixed term contract comes with both of those challenges.
This means some lenders can be a bit stand-offish when it comes to mortgage applications from temporary or fixed term workers. To put it bluntly, they’re worried about how you’ll keep up your mortgage payments if you go several weeks (or months) between jobs.
Thankfully, not all lenders share this outlook. What’s more, there are some extra steps you can take before you apply to give your mortgage application the best chance of being accepted.
These steps include:
- Demonstrating a reputation in your field: By providing the lender with a complete history of your employment contracts, you can prove that you’re able to source work regularly. Bonus points if it’s mainly within the same industry (for example, web design) as this suggests you have a strong reputation in that space and the contacts to find more work.
- Proving your income: It’s standard practice when applying for a mortgage, but proving your income takes on extra significance when you’re on a fixed contract. Depending on the mortgage provider, you may need to hand over your last year’s worth of payslips along with your two most recent P60s as evidence of your income.
- Showing stability: There’s that word again. Lenders want you to prove that your immediate employment status is stable. Showing them that your existing contract has some time to run (ideally six months or more) can put their minds at ease.
- Improving your credit score: Another step all mortgage applicants should consider, reviewing your credit score before applying for a mortgage can be the difference between success and rejection. As a contract worker, you’ll want to prove you can responsibly manage any money you’ve borrowed (such as loans, credit cards, or store cards) and you have a good habit of paying your bills on time.
You can read more about how to improve your credit score here.
- Saving a larger deposit: Paying a bigger deposit means you have to borrow less. And, generally speaking, if you don’t need to borrow as much, you won’t seem as risky to a mortgage lender. Learn more about mortgage deposits here.
- Working with a mortgage broker: Working with a mortgage broker like Habito gives you access to a vast number of lenders, including specialist lenders who are more likely to accept applications from fixed term contractors.
How much can I borrow on a fixed term contract?
It depends. If you have a strong employment history, few or no gaps in employment, and a contract with more than six months to run, you could qualify for many of the same mortgage deals and borrow the same amount as your permanently employed counterparts.
The catch? You’ll still need to meet the lender’s eligibility criteria before you can borrow, and these can be quite a bit stricter for agency workers, contractors, and those on zero-hours contracts than they are for permanent employees.
What sort of criteria do lenders have for fixed term contract mortgages?
Before mortgage lenders let you borrow any money, they want to make sure you can afford the monthly repayments. That’s why they prefer the regular income that comes with permanent employment: they see the risk of missed payments as lower.
Now, this doesn’t mean you won’t be able to get a mortgage if you’re on a fixed term or temporary contract. You’ll just have to get through a little extra scrutiny during the application stage.
With that in mind, lenders will generally look closely at the following:
- How long you’ve been in your current role: Many lenders require you to have a minimum of 12 months of experience in your current role before they give you a mortgage. Others need less, while some lenders have no minimum requirements as long as you can give them evidence of a consistent employment history.
- Whether you’ve had any breaks in employment: Some mortgage providers view any gap in employment over the past 12 months as a red flag. However, others are more relaxed. If you can demonstrate a sustainable income, your lender might overlook the odd break between contracts.
Note: What exactly constitutes a gap in employment differs between lenders. Whether your break was a week, four weeks, or more, a mortgage broker can save you time by concentrating on the lenders that fit with your employment history.
- How much time is left to run on your contract: Some lenders want to see at least 12 months left on your contract, while others will be happy with as little as three months. If you can prove that your contract has been renewed regularly in the past (or show written confirmation your current contract will be renewed when it expires), you’ll stand a better chance of getting your mortgage application approved.
Will having a guarantor help me get a mortgage on a fixed term contract?
A guarantor is someone who’ll make your mortgage repayments if you’re unable to do so. They’re usually a family member or very close friend.
Having a guarantor on your mortgage application can help when you’re employed on a fixed term contract. However, many lenders will want your guarantor to cover the whole loan rather than just the shortfall, so finding a guarantor who’s willing and able to do this can be challenging.
Can I remortgage on a fixed term work contract?
Yes, you can. But yet again, remortgaging on a fixed term contract comes with a few additional hoops to jump through.
If you’re switching lenders, you’ll need to go through another strict eligibility check, showing that you have a strong employment history with few or no gaps and a solid block of time left on your contract.
Sometimes, the easiest option for people on temporary or fixed term contracts is to remortgage with their current lender on a new deal (what’s known as a “product transfer”). Your existing lender has all the information they need already, and they know your track record of making your payments on time.
However, if you want a better mortgage deal, sticking with the same lender won’t always cut it. A mortgage broker can help you compare the best deals for your situation, taking your employment status into account.
Read our quick and simple guide to remortgaging to learn more.