Contractor Mortgage Gap in Employment

Mark Notley answers the most frequently Googled questions on Contractors with gaps in their employment.

The above podcast includes information which was correct at recording, some information may have changed.  See the below page for up to date information.

Can I get a mortgage as a Contractor with gaps in employment?

Yes, you can, it’s all down to the individual lender as to what they consider the risk element involved is. What they mean by risk is the bigger the gap in your previous employment means that you’ve had periods where you’ve not received income. A lender will then worry that, if that’s happened in the past, will it happen in the future therefore and how will they be able to pay the mortgage in those months they’re not receiving any income.

Presenting copies of your contracts, past and present to your broker will help them find the potential lenders available to you. Some lenders will not accept any gaps, some will accept weeks, some might accept three to six months. Very occasionally some will even accept a year’s gap, so it really is decided on a case by case basis. 

Will a lender consider gaps between contracts in exceptional circumstances?

Yes, they’ll consider anything. It’s down to the risks that they think that you present to them for your future payments. 

How do I prove my income if I have gaps between contracts?

It’s going to be down to how long the gap is. To prove your income the lender is going to look at what you earn over that contract length. The amount you’re borrowing and what the lender has assessed is your monthly need, to work out if you have enough income to bridge the gap of one to three months. Again this will be on a case-by-case basis. 

The more information that you can provide your broker with about your previous and current contract and your income, as well as your current commitments, the better the case we can put to the lender and they’ll make a pre-decision.

Can a Contractor show annual accounts instead?

Yes. Again, it’s down to the lenders, some will accept the value of the contract. So, if someone’s on a day rate of £500, they can work out 46 or 48 weeks worth of that income to  calculate the annual amount of income. 

Some Contractors are classed as Self-Employed by some lenders, and they’ll take the accounts that you get from your accountant or HMRC. Lenders treat this very differently, so it’s case by case.

How do I apply for a mortgage with gaps in my contracts?

The one thing you need to do is get a pre-approval from a lender through a broker, like ourselves, here, at Total Home Loans. Give your information to the broker and they may spot weaknesses and ask for further information, then they will present it to the lender.

Their name isn’t going to be put to a lender if they’re going to say no. If this is their scenario, we will go back to the client and provide advice on how to strengthen the application. The broker is key, and the more information your broker has, the better chance of getting a good deal from the lender.

The tidier that you can have your credit file, the better. Lenders nowadays like to know your situation so that they can assess that if you come upon hard times, how they can perceive you’re likely to bridge the gap and cope with situations that arise. As brokers we will pick out your strengths and weaknesses and then project that to the lender. Don’t be afraid to ask questions that you’re not sure about, come to us and let us help you.

How does a gap in contracts affect my Contractor Buy to Let mortgage application?

It shouldn’t affect a Buy to Let Contractor mortgage as much, because most Buy to Let mortgages are assessed based on the rental income of the property. The lender wants to know that you are working and have an income coming in to cover your personal situation but the Buy to Let will still be assessed on the actual rental income from the property. 

Your property may be repossessed if you do not keep up repayments on your mortgage.