For many professionals in contracting roles, securing a mortgage can feel like an uphill battle. Unlike those in permanent employment, contractors often face additional scrutiny from lenders due to fluctuating income and perceived job instability. However, with the right approach and preparation, contractors can absolutely secure a mortgage on competitive terms.
Here in the next blog of our contracting series, we’ll explore the key challenges contractors face when applying for a mortgage and provide expert advice to improve your chances of approval.
Challenges Contractors Face When Applying for a Mortgage
1. Proving Income Stability
Lenders tend to prefer applicants with steady, long-term employment. As a contractor, your income may vary depending on contract renewals, project availability, and any gaps between roles. This unpredictability can make lenders hesitant to approve your mortgage application.
2. Shorter Work History
Most mortgage applications require at least 12-24 months of continuous employment history. If you’ve recently moved into contracting, your shorter track record may raise concerns for lenders.
3. Higher Deposit Requirements
Some lenders consider contractors to be higher risk, which may result in a requirement for a larger deposit – often 15-20%, compared to the standard 10% for PAYE employees.
4. Limited Lender Options
Not all banks or mortgage providers cater for self-employed or contract workers, meaning you may have fewer mortgage options compared to salaried employees. Specialist lenders may offer more flexible terms, but sometimes at a higher interest rate.
5. Taxable Income vs. Actual Earnings
If you work through a limited company or as a sole trader, your taxable income may be lower than your actual earnings due to business expenses. Some lenders assess mortgage eligibility based on taxable income rather than gross contract earnings, which can reduce your borrowing potential.
How Contractors Can Improve Their Mortgage Approval Chances
1. Show a Consistent Contracting History
Lenders prefer applicants with at least 12-24 months of contracting experience. If you’re new to contracting, it may be worth waiting until you have a solid work history before applying.
Tip: If you’ve moved from a permanent role into contracting but remain in the same industry, highlight this to lenders – it demonstrates career stability.
2. Keep a Strong Financial Profile
A good credit score, stable income, and careful financial planning are key to securing mortgage approval.
Improve Your Credit Score:
· Always pay bills and credit cards on time.
· Keep your credit utilisation low (under 30%).
· Check your credit report for any errors before applying.
Reduce Outstanding Debts: Lenders will assess your debt-to-income ratio, so paying off loans, credit cards or overdrafts where possible can help improve your affordability.
3. Choose the Right Lender
Not all banks or mortgage providers are contractor friendly. A mortgage broker with expertise in self-employed and contractor mortgages can help identify lenders who:
· Consider gross contract income rather than taxable earnings.
· Accept shorter contracting history if you have a strong track record.
· Offer more flexible mortgage terms tailored to your situation.
4. Save for a Larger Deposit
The bigger your deposit, the lower the risk to lenders. If possible, aim for 15-20%, as this will help secure better mortgage rates and make your application more attractive.
5. Have the Right Documents Ready
Lenders typically require more evidence of financial stability from contractors. Be prepared to provide:
· 12-24 months of bank statements (personal & business accounts)
· Recent contract agreements (highlighting renewals & ongoing work)
· Two to three years of tax returns (SA302s) or company accounts
· A letter from your accountant confirming your income & financial standing
Bonus Tip: If your contracts are short-term, a signed contract extension can provide reassurance to lenders about your ongoing income.
Contractor-Friendly Mortgage Options
If you’re in a contracting role, consider these mortgage options:
· Specialist Contractor Mortgages – Some lenders assess your affordability based on annualised contract earnings rather than taxable income.
· Self-Employed Mortgages – Available if you operate as a sole trader or limited company director.
· Offset Mortgages – Ideal if you have significant savings, as they allow you to reduce interest payments.
Final Thoughts
Getting a mortgage as a contractor isn’t impossible, but it does require careful planning, the right lender, and solid financial preparation. By maintaining a strong credit profile, demonstrating income stability, and working with a broker who understands contractor mortgages, you’ll put yourself in the best possible position to secure a home loan.
If you are interested in a contracting career get in touch with Claire (clairebrogan@ascendpm.ie) and her team.