Contractor Mortgages and the Gig Economy

Contractor Mortage | Mortgage Broker in Derby

The Gig Economy | Mortgage Advice in Derby

The ‘gig economy’ has an ever-growing portion of the general public working within it. These people are working over short term contracts because of this it means they are not entitled to some benefits which employee’s might be such as sickness or holidays. The professions within this economy are varied ranging from both skilled and unskilled workers, with the highest percentage being in professional services.

Because of the basis of the gig economy, it’s marginally harder for these workers to get a mortgage as Lenders perceive these people to be self-employed. If you’re working within this type of economy to give yourself an increased chance of gaining a mortgage is to build up a track record of self-employment. You’ll most likely need one year’s history to qualify for a mortgage unless your contract has gone on for a longer duration.

If a Lender decides to view you as a Sole Trader you will then need to produce evidence of your net profit – this is the amount you have earned minus your expenses in which you may need an Accountant to help you with this.

If you have set up your own Limited Company then most Lenders will focus on the salary that you have paid yourself plus any dividends that are declared.

In contemporary times, Lenders are now becoming more flexible in the way they assess contract workers now that there are so apparent within the economy. If you have been operating this way for a while and are currently in a contract then they will consider your ‘day rate’ as a way to assess your income, depending on the industry.

The way in which Lenders will assess day rates will typically be that they will times the given rate by 5 then 46 weeks. They won’t include a full 52 weeks as Contract usually don’t work the full year and neither do they get paid holidays. This method works really well for IT contractors who tend to have a selection of contracts which they want to take.

Additionally, it is a good idea for any gig workers and self-employed applicants to get organised ahead of time before they start the mortgage application process. Tax can be a bother, but Lenders like to see a healthy level of sustainable earnings.

It’s also possible to get a mortgage on zero-hour contracts. Again, Lenders will want 12 months’ earnings before you can apply and will consider taking an average of your earnings over a full year.

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