What on earth is contract-based mortgage underwriting?

This page updated in its entirety, 3^rd July, 2025.

Contract-based underwriting is the method by which contractor-friendly lenders assess a contractor’s mortgage affordability. It’s a simplified method, using day rates instead of accounts and payslips. And, more often than not, it avails contractors of a much higher borrowing ceiling.

Once upon a time, this style of underwriting applied only to umbrella and limited company contractors. But, as ‘contractor’ now applies to myriad styles of independent worker, lenders are adapting accordingly.

To see if lenders cover the way you work, check out our ‘Contractor workers we help‘ page. It’s the starting point for your journey to a mortgage best suited to the way you work.

Why you’re unlikely to access this type of borrowing going direct

Not all lenders use contract-based underwriting to work out how much a contractor can afford to borrow. If you go in-branch or via a call centre, an unwitting advisor or agent will offer you either:

• a self-employed mortgage, asking for years of accounts and tax returns, or
• a mortgage based on your take-home pay, after deductions (if you have umbrella payroll payslips).

Those are the two main sets of lending criteria front-desk advisors have access to. The bad news is, neither calculation accommodates the way you work or your payment structure.

You need access to specialist underwriters who understand contracting in all its forms. But most lenders’ specialist underwriting teams don’t deal with the public direct.

Specialist underwriters’ time is precious. They prefer to go through an intermediary or broker who’s done the legwork for them. This is especially true if the applicant’s situation is complex, which all contractors’ are. It therefore needs a specialist broker to break the contractor’s application down for them.

Why aren’t branch/call centre staff equipped to deal with contractors?

Due to contractors’ tax efficiency, their borrowing potential isn’t clear using traditional affordability calculations. The level of expertise needed to determine a contractor’s mortgage affordability requires an experienced eye.

The same can be said for fixed-term contractors, locums, zero-hours contractors, and other flexible workers. Their work schedule doesn’t fit into traditional affordability algorithms.

But, comparatively, the market for contract-based underwriting represents only a fraction of the entire mortgage sector. So, the in-depth knowledge required to understand contractors’ pay rarely justifies lenders training all their advisors to that level.

As such, most lenders rely on their specialist underwriters to process contractor mortgage applications. They, in turn, rely on appointed brokers to highlight only what they need to see from contractor applicants. Enough information to make a decision, that’s all they want.

Helping mortgage providers understand professional contractors’ income

It’s no coincidence that we can offer contract-rate-based mortgages to all sectors of contracting. Since 2004, we’ve worked with many lenders to help them see alternatives to relying on post-tax accounts.

We’ve enjoyed considerable success, opening up doors that would otherwise have remained closed. We now deal with more contractor-friendly lenders than ever before.

But it’s not ‘job done’ for us. We’re constantly approaching new lenders to try and get them on board with contract-based underwriting. And, for those lenders with whom we already work, we have a constant appraisal process.

Not all lenders are willing to bend with the way the wind’s blowing

But some lenders’ affordability criteria remain so inflexible that they can’t incorporate contract income. The problem for contract workers is, those lenders don’t advertise that fact.

They might say that they deal with contractors. And, perhaps, technically, they do. But they will insist on trying to pigeonhole them, working out affordability using outdated criteria.

It’s this naivety that’s proving a stumbling block for many freelancers and contractors. So, if you’ve experienced this stubbornness with a High Street lender, don’t panic. We can find you a mortgage provider who’ll lend based on your gross contract income.

The big questions now are: “Who, Where and How?”!

Well, you’d do worse than starting here »

How do traditional and contractor mortgages differ?

With regards to the actual loan, there’s no difference between a contractor mortgage and a traditional one. Interest rates, monthly repayments and how much deposit a lender requires should be similar.

The real difference lies in a contractor’s perceived affordability. In other words, how lenders arrive at the amount they’re prepared to lend.

This is all part of the underwriting process; that’s what’s different about contractor mortgages. In-branch advisors can often gather enough information for ‘permies’ or traditional self-employed applicants to process their applications. The same doesn’t hold true for contractors.

Contractor mortgage underwriting

At the contractor-friendly lenders we deal with, only underwriters who understand how the flexible workforce works deal with our applications. That’s because contract-based underwriting remains a specialised process.

Here’s the difference. Unlike in-branch advisors, it’s underwriters who approve or reject non-standard mortgage applications.

The problem contractors face trying to access specialist underwriters is twofold; they must:

1. identify which lenders have contractor-friendly underwriters;
2. get past the desk jockey to access the specialist underwriter once they’ve found them.

Both of these are almost impossible for members of the public walking in off the High Street. That’s why contractors need to go through a niche-specialist brokerage. Such brokers will have identified and built relationships with these elusive decision-makers.

What a contractor mortgage is (and what you need to get one)

A contractor mortgage helps independent professionals get on the property ladder with impunity. This type of mortgage underwriting is essential when contractors:

• constantly flip-flop between limited company, umbrella and even PAYE roles;
• have worked short-term contracts, but have then returned to PAYE employment;
• are new to contracting, or if a mortgage would take them beyond retirement;
• are yet to accrue the accounts that lenders need to accurately assess them on a self-employed basis.

Jumping through hoops to prove affordability at these junctures is no bad thing! Here’s why…

What makes a good contractor mortgage application?

The criteria used for contract-based underwriting are specific, but vary from one lender to another. That’s because all lenders have their own attitude to risk. Their interpretation helps them forge the underwriting guidelines to which they adhere.

In many instances, we’ve helped underwriting teams understand contracting. That’s purely down to our understanding of:

• the dynamic contractor market;
• what makes a lender tick when considering the risk contract-based underwriting is likely to pose to them.

Why it’s so important we get to know ‘About you’

To progress your mortgage application, we need to learn about you and your business (if applicable). This helps us match you with the right mortgage provider and their specific product(s).

Us considering your employment status at a personal level has another benefit. We can then help the lender make an informed decision about accepting your application.

Factors lenders look for to approve a mortgage based on contract income are:

• a sustained daily/hourly contract rate (and often a minimum day rate);
• gaps between contracts: lenders don’t like to see more than 4-6 weeks between contracts;
• duration of the current contract, including how long it has left to run;
• potentially including evidence of or the potential for a contract renewal/extension;
• trading/payment structure through which they operate;
• current occupation and its sustainability: IT professional; engineer; financial services; business analyst; NHS/locum; oil & gas, etc.;
• length of time contracting, or at least a history of working in the current industry.

At first glance, that seems a lot of information to provide. But underwriters can glean most of that info from a current signed contract and CV. Both of these documents will form part of the formal application.

Don’t miss the opportunity your contract rate presents

The information you share helps us understand your situation with a degree of accuracy. And we have to, as there’s no automated underwriting at the levels we negotiate.

So, now you know the criteria that make up contract-based mortgage underwriting, use them!

It’s vital you get this information together before talking to a financial advisor. If you talk to an IFA who doesn’t ask for these documents, ask yourself why.

Using a contract to calculate affordability bypasses the typical self-employed criteria. In other words, it foregoes the necessity of providing accounts.

Don’t let an advisor force you down the self-employed route. An SA302 and/or accounts rarely include retained profits or reflect a day rate. As such, they won’t realise the mortgage that your income has the potential to.

What else do I need to know?

Deposits work for contractors in the same way they work for permanent employees. The more you can ‘put down’, the lower the interest rate you’ll attract on your outstanding mortgage.

In mortgage-speak, the sum of the deposit and mortgage loan is the loan-to-value ratio, or LTV. In English, it’s the value of your mortgage loan compared to the cost of your new home minus the deposit.

So imagine that you have 5% deposit, the least for a contractor mortgage. The balance that you need to borrow is 95%. Therefore, you’d have to take out a 95% LTV mortgage.

Also, the bigger your deposit, the lower ‘risk’ you will be to an underwriter. A bigger mortgage deposit massively reduces the risk of negative equity. And, make no mistake: getting a mortgage as a contractor is all about reducing the perceived risk.

All in all, a lower LTV ratio will make both your home more affordable and you less of a risk.

Don’t ignore your credit rating

Another factor that impacts your ability to get a mortgage is your credit history. And, of course, it’s accompanying ‘score’.

We recommend that you check your credit score before you apply for any mortgage. That’s because failed searches leave a black (negative) mark on your history.

Ideally, you’d look to address any issues before an underwriter sees them. This might mean you waiting for any corrections to take effect before you apply.

We do have some lenders who accept ‘mild’ adverse credit. But a mortgage underwriter will reject applicants whose credit history shows too much adversity. You can check your records online via Experian, Equifax or with an app, like ClearScore.

Key takeaways

If nothing else, take this one lesson away with you. Mortgages secured using contract-based underwriting needn’t be more expensive than a normal mortgage.

Also, using the right specialist broker reduces the frustration, risk and timescale of the process. They know what criteria mortgage underwriters use to approve applications in the swiftest manner.

Presenting only relevant documents gives you the best chance of securing a mortgage as a contractor. And yes: you can take that to the bank. But, you’d best let us do that bit for you.