NatWest contractor mortgage lending criteria
NatWest is a prominent high-street lender offering competitive mortgages for contractors.
The lender accommodates many different types of worker from the UK flexible workforce. This flexibility for multiple working arrangements makes NatWest a stand-out lender.
All contractors welcome
One of the UK’s ‘Big Five’ banks, NatWest accommodates all contract workers, including day-rate contractors:
- limited company contractors;
- umbrella payroll employees;
- CIS workers;
- foreign nationals;
- locums;
- zero-hours contractors.
In addition, NatWest accepts contractors from all professions, but some income restrictions apply to certain types. The lender also doesn’t apply reductions for exchange rate fluctuations for contractors paid in foreign currency.
Contracting requirements
Contractors must evidence a contracting ‘history’ of 12 months. The contractor must have already completed six months’ contracts when they apply. If they’ve worked seven months, underwriters will need a future contract commitment of at least five months, giving them the 12 months ‘history’ they need.
Once past the 12 months’ contracting history, NatWest imposes no further minimum time remaining on the applicant’s contract for contractors earning >£75k per annum.
Contractors who earn less than £75k per annum must evidence at least three months left on their contract at time of application. Failing that, they must provide evidence of a contract extension or renewal.
For all contractors, gaps between contracts over the last 12 months mustn’t exceed six weeks.
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How to evidence contract income for NatWest
Besides the contract itself, here are ways the different types of contractors should evidence income.
High income day-rate contractors
NatWest's underwriters use the gross day rate from day-rate contractors' contract as the basis of the affordability calculation.
To back that up, underwriters need the applicants latest three months’ consecutive personal and business bank statements and contract(s) covering a duration of 12 months.
The contractor must have completed six months' contracting at time of application and in addition, the contracting history can't show more than six weeks' gaps between contracts over the last 12 months.
Umbrella payroll workers
NatWest will use umbrella contractors' payslips to evidence income. Underwriters will use the figure after umbrella company deductions (excluding NICs).
CIS (Construction Industry Scheme) subcontractors
It doesn't matter that CIS contractors class themselves as self-employed for tax purposes, NatWest uses the contractors' gross income from their contract vouchers/statements/payslips from the last 12 months in their affordability assessment.
Zero-hours contractors / piece workers
Zero-hours contractors and piece workers must have a current contract in place at time of application. They must also be able to evidence 12 months' history of employment in that contract.
Foreign nationals
NatWest uses an acceptable list of foreign currencies it will accept for affordability purposes. Provided the contractor’s recipient currency is on it, they can borrow subject to the Bank’s day rate calculation.
If the contractor uses a limited company payment structure, it must be registered in the UK or Republic of Ireland. The contractor also has to reside in the UK for the majority of the time.
Underwriters will need to see a copy of the applicant’s passport. Plus, the applicant must get a ‘share code’ to prove their residence status.
NatWest limits mortgage borrowing for contractors without ILTR to 75% LTV (25% deposit). Borrowers can only take out a repayment mortgage (Capital and Interest), too. Interest-only mortgages are off the table.
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Assessing affordability
NatWest applies no minimum income level for fixed-term umbrella contractors. But contractors who use limited company payment structures need to earn over £75,000 per annum.
The lender’s annualisation calculation (for affordability purposes) is:
- Day rate (£) x 5 days (per week) x 46 weeks (per year) unless the contract confines the contractor to fewer hours
NatWest will also lend into retirement, up to age 75. This is particularly advantageous for first-time buyers looking to maximise affordability. For older borrowers, it works as a way to reduce ther monthly mortgage repayments.
The bank also specialises in accepting multiple concurrent contracts, basing income on the combined gross pay. So, imagine you have one contract paying £400 per day and another £500 per day. Underwriters would then use £900 per day for your affordability assessment.
NatWest in a nutshell
NatWest’s flexible approach to multiple contracts and foreign income gives the lender a broad appeal. Along with competitive rates, it’s a strong option for contractors meeting income and experience criteria.
Does NatWest sound like the right lender for you?
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