Virgin Money contractor mortgage lending criteria
Virgin Money was amongst the first lenders to adopt a specific contractor mortgage policy.
Over the years, the lender’s criteria have fluctuated. However, its current model covers many angles. It will appeal to higher-earning contractors with a solid track record.
Mortgages for day rate contractors
Virgin Money welcomes contractors on a fixed rate, confirmed work schedule and firm contract duration. This includes contractors using a limited company payment structure, providing they:
- do not employ any other contractors, and
- work on only one contract at a time.
Affordability calculation
Virgin will lend up to 95% LTV (5% deposit). To work out income for affordability, the lender uses:
- Day rate (£) x 5 days (per week) x 46 weeks (per year)
Work history and income
The lender has no minimum income requirement, but does ask for different work history if you earn either above or below £50k per annum. The different criteria can help applicants new to contracting:
Contractors earning =>£50,000 per annum must have either:
- one year’s contracting history, or
- two years’ overall experience in the same industry.
Contractors on <£50,000 per annum need two years’ history working in the same industry.
Ideally, Virgin Money’s underwriters like to see fewer than six weeks’ gaps between contracts. But they take a common-sense approach if there are more and there’s a good explanation for additional gaps.
If the contractor applicant has less than a month remaining on their contract, they must provide evidence of a contract renewal.
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Inside IR35 and umbrella payroll companies
Virgin Money will consider umbrella contractors working contracts inside IR35. The lender uses a contractor applicant’s payslips to verify their income.
Before underwriters get a figure to use in their affordability calculation, they will deduct:
- statutory employer costs (including employer NICs and the Apprenticeship Levy), plus
- umbrella payroll service fees.
They’ll first deduct those amounts from the contractor’s gross income. They’ll then annualise the nett income by multiplying by 46 weeks.
Zero-hours contracts, fixed-term employment, and agency contracts
To qualify with an agency, zero-hours or fixed-term contract, applicants must have two years’ history in the same line of work. This experience can be as a PAYE employee and/or a contractor.
Zero-hours contractors must, however, back up that track record with two years’ income as a zero-hours contractor.
If the applicant’s time in their current job is less than a year, Virgin can still help. But its underwriters can only use income at a level consistent with the applicant’s previous job.
Workers who Virgin Money can’t help are seasonal or short-term temps. Such contracts don’t have enough work history to satisfy Virgin’s risk policies.
Construction Industry Scheme (CIS)
Workers in the Construction Industry Scheme can apply for a mortgage with Virgin Money. However, underwriters will assess CIS contractors using Virgin’s self-employed criteria, not their day rate.
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Virgin Money in a nutshell
Virgin Money’s flexibility around employment gaps and willingness to consider new contractors give contractors options.
Yes, applicants must meet specific income and experience criteria. But, as long as they do, it’s a smooth process thereafter.
Does Virgin Money sound like the right lender for you?
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