Skipton Building Society contractor mortgage lending criteria
Skipton Building Society has enhanced its contractor-friendly policies, thanks mainly to its willingness to take on board market feedback. Even so, its underwriters’ determination to use common sense is still apparent. This approach aims to make mortgages more accessible for more contractor types.
Day-rate contractors now have nuanced criteria, depending on their payment structure and how much they earn. Skipton’s policies include limited company contractors and those working through umbrella companies. Whether the contract is inside or outside IR35 makes no difference to their underwriters.
As well as day-rate contractors, Skipton welcomes fixed-term contractors, CIS workers, agency and piece workers, zero-hours contractors and locums. The lender is a great option for foreign national contractors, too. However, all contracts must be in pounds sterling, sourced in the UK and taxable.
Day-rate contractors earning over £50k pa
Skipton accepts contractors from all industry sectors. However, each contractor applicant must have both:
- at least two years’ work history in that industry, and
- six months’ contracting history, but not necessarily the last six months.
Contractors must have at least one month remaining on their contract at time of application. Skipton is willing to make an exception if the applicant has either:
- a client/agency letter declaring their intent to renew the contract, or
- CV-backed work history showing no regular gaps between contracts.
Skipton accepts up to a generous 12 weeks’ gaps between contracts. Furthermore, if the applicant has a valid reason (through choice, and supported themselves during that break), the lender will go beyond those 12 weeks.
Affordability criteria
Skipton BS annualises the day rate on the applicant’s current contract to work out their mortgage affordability. The calculation underwriters use (for both umbrella contractors and limited company contractors with 100% shareholding) is:
- Day rate (£) x 5 days (per week) x 48 weeks (per year)
Skipton is a good lender for contractors working on contracts at the same time. If the contractor works on two contracts to make up a 40-hour week, that’s fine.
If one of those contracts is a full-time contract, Skipton would first use the full value of that. The lender would then add 50% of the second contract’s value (up to 20 hours) to work out a contractor’s weekly rate.
Day-rate contractors earning under £50k pa
Similar to contractors earning >£50k, contractors earning less than £50k need two years’ industry experience and six months’ contracting history. That’s where any similarity to working out income for mortgage affordability purposes ends.
If the applicant’s contract has a specific value, underwriters use that amount in their affordability calculation.
Where the contract doesn’t have a specified amount, they annualise the most recent pay slip or invoice. The underwriters can exercise common sense, though. If the applicant’s most recent payslip doesn’t reflect their usual income, they can average it over a longer period.
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CIS contractors
Workers in the Construction Industry Scheme must have two years’ industry experience. If they have a contract, Skipton would like to see that as evidence. If not, the lender needs a letter from their employer confirming their income.
To work out affordability, Skipton uses the amount on the last three payslips, averages the weekly rate, and then annualises it by 48 weeks.
If there is an anomaly in those last three months, such as a holiday or Christmas, Skipton’s underwriters’ common sense kicks in. They’ll look back further to get a more reflective weekly average.
Zero-hours contractors, locums and supply teachers
The criteria for locums, supply teachers and zero-hours contractors are almost identical to those applied to CIS workers.
The big difference for these sectors is that Skipton annualises income using 52 weeks instead of 48.
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Skipton Building Society in a nutshell
Skipton Building Society’s updated policies are perfect for contractors seeking flexibility, especially CIS workers and locums.
With its accommodating approach to contract gaps and competitive income calculations, the lender accommodates most contractors.
However, those with adverse credit histories or heavy debt may need to explore an alternative.
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