Can I get a mortgage on a fixed term or zero hours contract

Can fixed-term contract employees get contractor mortgages?

At Freelancer Financials, we’re used to people using us as a last resort. Mention any other type of employment contract to a lender than 'permanent', and, well. It’s as if a Dementor has sucked all the joy from your advisor’s world. Then, as a consequence, yours.

Let's make no bones: our main client profile is that of the professional contractor. They often work through agencies and pay themselves through a limited company structure.

But there is another type of contract that's becoming ever more popular. It's a mix between permanent employment and professional contracting.

Ladies and gentlemen, please let me introduce the fixed-term contract.

What's the difference between professional contracting and fixed-term contracts?

Like professional contracting, there's no generic way lenders deal with fixed term's nuances. If a bank or building society caters for them, it's rarely at branch level.

But that's where any similarity between the two types of working ends.

Across industry forums, there's one huge common denominator underpinning professional advice:

if you're on a fixed-term contract, speak to a specialist mortgage broker about buying a home!

It's good advice, too, even if you are only a second-named applicant. You and your partner’s success in getting a mortgage on a fixed-term contract could hinge on you taking it.

Why do we need a specialist broker at all?

People who turn to us may have had their mortgage declined for any number of reasons; their:

• contract may be for cover over a short duration;
• contract earnings don’t meet the minimum day rate for a genuine contractor mortgage;
• experience in the field they’re now working is insufficient;
• chosen mortgage provider has no underwriter criteria for contractors.

We also know that different mortgage lenders have unique interpretations of “contractors”.

So what’s the score if you’re on a fixed-term contract looking for a mortgage? Are you self-employed, an employee or a bona fide contractor? Fair question.

Fixed-term contracts: they do offer a modicum of protection

As with most contract-based mortgages, fixed-term contract borrowing is a specialist niche. Some lenders are open to this type of employment. Others, not so much.

They may not recognise stringent legal elements that cover fixed-term workers. Dismissal procedures for this type of working are more protective now than at any other time.

But, here’s the thing. The end of a fixed-term contract is, from a legal perspective, a dismissal.

That means that employers must find a reason for not offering a run-on contract. Where they cannot, employers often cite redundancy. But they are duty bound to justify their decision.

That means that the employer should consider redeployment if possible. Times that they don’t need to back up their non-renewal could be if:

• a contract covered a specific reason (maternity, sickness, etc.);
• there are reasonable questions over your conduct or capacity;
• an SOSR (some other substantial reason) comes into force.

The problem banks find is this. Whilst there are rules that cover fixed-term workers, what happens during any appeal?

The appeal period is indefinite by nature. How will you cover the mortgage during such an appeal? And, what happens if you lose?

Assessing and minimising risk

All mortgage lenders have a duty to assess risk. Some are less transparent than others, but they’re not doing this out of spite.

The FCA has produced guidelines to which mortgage providers must adhere. And, since the credit crunch, most banks and building societies are strict on that score.

As if getting a mortgage on a fixed-term contract wasn't already tough enough. So, why would you risk another failed credit search, another blot on your copybook?

Too many black marks on your credit could jeopardise any homeownership dreams you have. There is a more secure way to get a mortgage on a fixed-term contract.

The imperative need for specialist mortgage lending

Some lenders with whom we deal offer a fixed-term contract mortgage through us. These savvy providers accommodate all workers, not only professional contractors.

In our industry, there's one unequivocal name in contractor mortgage lending: The Halifax. Again, they've challenged the status quo and offered fixed-term workers mortgages.

Moreover, you can even get mortgages now for people on zero hour contracts.

There’s a reason that specialist mortgage brokers exist. They understand mortgage lenders’ tolerances. They can take one look at your circumstances and identify a potential lender.

You won’t get that whole of market service on the High Street. There, an advisor only has access to their employer's particular mortgage range.

Is it time to change the way you work?

If you're in a fixed-term contract, you may want to consider talking to your employer. If they're amenable, they might offer you your next contract in a different way.

Mortgage providers do look at time served in a specific industry. After your current contract expires, you'll have that.

Get a contract that you can fulfil as your own boss, then you'll be in a stronger position. You can access self-employed mortgages or even genuine contractor mortgages.

There are limitations on both. Also, legal and taxable aspects about which you'll need an accountant to make you aware. But if buying a home is your top priority, then these may be sacrifices worth making.