TSB contractor mortgage lending criteria
TSB offers mortgages to day-rate contractors, sub-contractors, fixed/short-term contractors, agency workers, construction industry scheme workers and zero-hours contractors. By focusing on day rates, the lender allows contractors to potentially borrow more than via more traditional underwriting methods.
Day rate contractors utilising a limited company/PSC
TSB welcomes contractors from all industry sectors. However, their contract day rate must gross at least £50,000 per annum. This amount excludes bonuses, overtime and allowances, which TSB doesn’t incorporate in its affordability calculation.
Contractors must include living and travel costs as commitments in their application as TSB factors them into affordability assessments.
Applicants must have at least 12 months’ contracting history, with no more than six weeks’ gaps between contracts.
The contract must have three months left to run at time of application. If it has fewer than three months remaining, the contractor must get an extension/renewal covering at least three months after their current contract expires.
In the case of rolling contracts, the client/agency must provide documented evidence that the contract remains valid.
Day rate affordability calculation
TSB’s affordability calculation takes a step more than most contractor-friendly lenders’ criteria. Rather than work off the day rate on the contract, advisors must first work out the average day rate from the last 12 months. Or, where there’s an extension promise, incorporate the future day rate.
Once they have that average day rate figure, they can then work out the amount for mortgage affordability purposes thus:
- Average day rate (£) x 5 days (per week) x 46 weeks (per year)
If the contract is for fewer than 5 days per week, advisors factor this into the calculation.
They will then incorporate the relevant multiplier to provide the ceiling amount the contractor can borrow.
Day-rate contractors on multiple incomes
If a contractor has worked on two contracts in the last 12 months, TSB will take the average day rate. For example, if one contract paid £350/day and the other £250/day, the average would be £300/day (£350 + £250 = £600 / 2 + £300).
The advisor would then base the affordability on that average day rate, exactly the same as day rate contractors working a single contract:
- Average day rate (£) x 5 days (per week) x 46 weeks (per year)
If the contract is for fewer than 5 days per week, advisors factor this into the calculation.
They will then incorporate the relevant multiplier to provide the ceiling amount the contractor can borrow.
For shift patterns, TSB uses a manual calculation. For example, if a contract required 12 days on and 12 days off, advisors would only use the average day rate from the days worked.
TSB’s common-sense approach to underwriting means the lender can be flexible if the applicant is slightly outside its criteria. If an application warrants special attention, TSB can give an exception and underwrite a case on its merits.
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Umbrella company contractors, including agency workers, locums and fixed term contractors
TSB imposes no minimum income threshold for umbrella payroll and agency workers, locums and fixed-term contractors.
Applicants must have at least 12 months’ contracting history, except junior doctors, who need only six months’ history. All applicants should have no more than six weeks’ gaps between contracts.
The contract must have three months left to run at time of application. If it has fewer than three months remaining, the contractor must get an extension/renewal to cover at least the next three months of employment.
Contractors must provide a client/agency letter stating that a contract is still valid where:
- They have provided 12 months’ contract history, but are now on a rolling contract, or
- The current contract is due to expire within three months
Underwriters base umbrella payroll contractors’ gross income on payslips after all the umbrella deductions are taken out.
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Other types of contractors
CIS contractors
Where a CIS contractor’s employer deducts full PAYE tax and NICs, TSB treats them as it would a fixed-term contractor.
Applicants must have at least 12 months’ contracting history, and have no more than six weeks’ gaps between contracts.
The contract must have three months left to run at time of application. If it has fewer than three months remaining, the contractor must get an extension/renewal to cover at least the next three months of employment.
Zero hours contracts
TSB assesses each application from a zero-hours contractor on merit. As a precursor to applying:
- Zero-hours contractors must have at least 12 months’ contracting history, showing no gaps exceeding 6 weeks
TSB will assess income using:
- The latest P60
- The latest three months’/six fortnights’/12 weeks’ payslips, and
- 12 months’ contract history to show a consistent and sustainable level of income
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.
TSB in a nutshell
On the face of them, TSB’s contractor policies are less straightforward than other contractor-friendly lenders’ criteria.
If you’re considering the TSB, be sure to talk to one of our brokers first.
They will appraise your situation and tell you exactly what you need for/can expect from your application.
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