Hodge Bank contractor mortgage lending criteria
Hodge Bank has recently taken bold steps to bring contractors and self-employed customers into its mortgage fold. Its new policies should help independent professionals find it just as easy to secure a mortgage as their employed peers.
Our excellent relationship with the bank’s experienced team of underwriters means they will assess each application based on its merits. Plus,the bank have ensured that they assess all these contracting types on 100% of their income:
- First-time contractors
- Day-rate contractors (including those working multiple contracts)
- Umbrella company employees
- CIS contractors
- Fixed-term contractors
Lending criteria for day-rate contractors
If you’re a day-rate contractor working only one contract, the following lending criteria apply. Hodge Bank:
- Accepts all day-rate contractors, and requires no minimum income or specific industry
- Requires at least 12-months experience contracting in a similar role
- Expects three months remaining on contract at time of application (if less than three months remaining, a contract renewal, or strong evidence of future renewal must be provided)
- Allows a maximum of three months’ gaps between contracts over the last 12 months (although any gaps must be justified to underwriters, such that annual weeks worked + any gaps must = 52 weeks)
- Uses an affordability calculation (before lender multiplier) of contract day rate (£) x days worked per week x 48 weeks
Multiple-contract day-rate contractors
Hodge Bank offers its ‘multiple contract’ criteria to experienced contractors only. The evidence the lender wants depends on how many contracts the contractor is working.
If the applicant is juggling up to three contracts, they must provide evidence that they’ve managed to do so for at least 12 months.
For 3-to-5 contracts, underwriters will expect evidence showing successful contract management over the last two years.
Underwriters will also consider the long-term sustainability of these contracts. They will check how many days and hours per week the applicant is working, and make a judgement thereafter.
In each instance, the contractor must provide a CV or career summary when they submit their application.
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Lending criteria for day-one contractors
Hodge Bank will accept mortgage applications from day-one contractors, i.e. contractors working the first day of their first contract. To qualify, applicants must:
- Be on a contract worth at least £50,000 per annum
- Be working on only one contract
- Be able to evidence previous employment in the same industry/role as their new contract
- Their new contract must have at least three months left to run. If not, the contractor must provide evidence of contract renewal or documentation that gives underwriters confidence that it will be extended or renewed.
If the day-one contractor meets all those criteria, Hodge Bank will use the following annualisation calculation:
- Day rate (£, as per the contract) × 5 (days worked per week) × 48 (weeks worked per year)
Underwriters will apply Hodge Bank’s multiplier to the annualised figure thereafter. This will show you how much you can afford to borrow for your mortgage through them.
Lending criteria for payroll umbrella workers inside IR35
Most of the criteria for umbrella contractors are the same as for day-rate contractors. The main difference is how Hodge’s underwriters work out the annualised figure for lending purposes.
In the first instance, they treat umbrella employees the same as employed, using evidence of pay from payslips. They will use the lower of either:
- The gross value of the contract, or
- Income calculated from the payslip/bank statement (including bonuses and commission at 100%)
The criteria regarding contract experience, months remaining at application and contract gaps are the same as for day-rate contractors shown above.
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Lending criteria for fixed-term contractors
Hodge Bank also accepts applications from fixed-term contractors. For the annualised affordability assessment, underwriters will use the applicant’s income from:
- The contract, if the amount is designated thereupon, or
- The payslip amount, multiplied by the length of the contract
The other lending criteria for fixed-term contractors are:
- Hodge expects three months remaining on contract at time of application (but where the contractor has less than three months remaining, they must provide a contract renewal, or strong evidence that the client/agency will renew the contract)
The lender may consider day-one contractor applicants who:
- Have 12-months contracting experience (in a similar role), and
- Have a contract duration of at least 12 months
Lending criteria for CIS subcontractors
Hodge Bank will consider CIS contractors, whether they’ve opted for gross payment status or have tax and NICs deducted at source.
For CIS contractors who’ve opted for gross payment status, underwriters will treat them as self-employed. Such applicants Hodge’s will assess them using its standard self-employed criteria, using either:
- one year’s trading accounts, or
- the latest year if contractors have more than two years’ trading history.
If a CIS contractor’s employer deducts tax and NICs at source, underwriters will treat them as a contractor, whereby standard contracting criteria apply. In addition, the applicant must have 12 months’ contracting history as a CIS contractor.
With regards to the contract term remaining at time of application, the same criteria as those for day-rate contractors will apply.
Agency and zero-hours contractors
Hodge Bank also welcomes applications from agency and zero hours contractors, including:
- Locum doctors and dentists;
- Bank nurses;
- Supply teachers.
Contact our specialist broking team for details.
Talk to the contractor mortgage experts
As the leading mortgage broker for contractors and the flexible labour workforce, you’ll be in safe hands with Freelancer Financials.
Freelancer Financials is an independent broker with access to every mortgage from every lender, meaning we can offer truly unbiased advice and find you the best deal for your unique circumstances.
Established more than 20 years ago, we have a proven track record of arranging over 30,000 mortgages for contractors, umbrella company workers, CIS subcontractors and the self-employed.
Our specialist broking team will support you throughout your mortgage journey, and we have nearly 1000 5-star reviews from clients to prove it. Whatever your mortgage needs, it’s time to talk to the experts.
Hodge Bank in a nutshell
Hodge Bank has expanded its lending criteria to cover many payment structures and income types. Using 100% of contract income as baseline affordability, it has truly put contractors on a level playing field with their permie peers.
With its additional later-life lending and working multiple contract policies, it can also cater for more than run-of-the-mill contracting. A worthy addition to our portfolio of contractor-friendly lenders.
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