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Contractor Mortgages and the Gig Economy

What is the Gig Economy?

There is a high number of people within the UK working in the ‘gig’ economy meaning people are working on short term contracts. As a result of this, they are not entitled to benefits that employed individuals are, i.e sickness or holidays.

Many of these workers are in various roles varying both skilled or unskilled workers. Though the majority of these consist of jobs such as couriers due to the rise in recent years of online shopping.

It’s much more challenging for gig economy workers to get a mortgage as they are often treated by lenders as being Self Employed in Nottingham. If the applicant is aiming to get a mortgage then they will have to build up a track record of employment to give themselves their best chances of gaining a mortgage. One years history to qualify for a mortgage will most likely be needed unless a current contract has a very long time to run.  

If the lender chooses to treat the contract worker as a sole trader then they will need to produce evidence of net profit. You may need an Accountant to help. However, if the applicant has set up their own Limited Company then most lenders will look over the salary that has been paid to the applicant plus any other dividends declared.

There is no reason to worry though because as lenders are starting to be more flexible in how they assess contract workers due to increasing numbers. This has allowed lenders to view finances in alternative ways such as if an applicant has been operating this way for a while and is in a current contract then sometimes a ‘day rate’ is able to be assessed.

Lenders that assess on day rate will typically times that day rate by five then by 46 weeks. They know that a Contractor is unlikely to work for the full year even if holidays aren’t paid for, hence the outcome of 46 weeks. This is hugely popular for IT Contractors who tend to pick and choose their contracts.

It’s a good idea, not just for self-employed applicants, but for anyone thinking of applying for a mortgage to get organised in advance in order to speed up the mortgage application. It’s understandable no-one likes paying tax more than they have to but it’s important to remember that if a self-employed applicant is wanting to apply for a mortgage then lenders will be wanting to see healthy levels of sustainable earnings over a reasonable length of time.

When looking into the topic of zero-hour contracts, it is possible for this type of applicant to get a mortgage too. Again, Lenders will want 12 months earnings before an applicant can apply and consider taking an average of earnings over a full year.

Mortgage Advice in Nottingham

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