Getting a mortgage can be daunting, especially if you’re on a fixed-term contract. Unlike permanent employment, which offers the predictability lenders love, fixed-term contracts can seem risky and unstable to those deciding whether to lend you a substantial amount of money. However, with the right approach and preparation, securing a mortgage on a fixed-term contract is entirely possible.
In this guide, we’ll walk you through the key aspects of navigating the mortgage process as a fixed-term contract worker. We’ll cover whether it’s inherently harder to get a mortgage under these circumstances and the specific criteria lenders look at. You’ll find practical tips on how to strengthen your mortgage application, including the benefits of having a guarantor and whether it might be wise to wait for a permanent job before applying.
We’ll also explore what happens if your contract ends after you’ve secured a mortgage and introduce you to various government schemes that could help make buying a home more accessible, even with a non-traditional employment situation. By understanding these factors and preparing thoroughly, you can improve your chances of getting the mortgage you need to buy your dream home.
A fixed-term contract mortgage is a home loan tailored for individuals working on employment contracts with specific end dates rather than permanent positions. These mortgages can be more challenging to obtain due to the perceived instability of income. Lenders typically require evidence of a stable income history, minimal employment gaps, and current contracts extending several months into the future.
Applicants might need to provide additional documentation, such as previous contracts, bank statements, and letters from employers indicating potential contract renewals. Specialist lenders and some high street banks offer these mortgages, often scrutinising applicants more rigorously than those in permanent employment.
Learn more: What is a fixed term contract?
Yes, you can get a mortgage on a fixed-term contract, though it may be more challenging than for those with permanent employment. Lenders typically view fixed-term contracts as less stable, so they scrutinise your employment history, income stability, and the length of your current contract more closely.
To qualify, you generally need to demonstrate a history of continuous employment with minimal gaps. Having at least 6 to 12 months remaining on your current contract can improve your chances. Providing documentation such as past contracts, payslips, bank statements, and a letter from your employer indicating the likelihood of contract renewal is crucial.
Specialist lenders and some high street banks, like Halifax and Santander, offer mortgages for fixed-term contract workers. These lenders may have specific criteria, such as requiring a larger deposit or having stricter income verification processes. Consulting with a mortgage broker experienced with fixed-term contracts can help navigate the application process and find the best deal.
Yes, it is possible to get a mortgage with a rolling fixed-term contract in the UK, although it may present more challenges compared to permanent employment. Lenders tend to view rolling contracts as less stable due to the lack of guaranteed long-term employment.
However, many lenders are open to considering applicants with rolling fixed-term contracts, especially if certain criteria are met.
To improve your chances, you should demonstrate a consistent employment history, ideally with minimal gaps between contracts. Lenders prefer applicants who can show they have been consistently employed on rolling contracts for an extended period, as this suggests a level of job stability. Providing comprehensive documentation, such as past and current contracts, payslips, and bank statements, is essential.
Additionally, lenders will look at the length of your current contract and the frequency of renewals. If you have a track record of contract renewals or written confirmation from your employer about future renewals, this can positively influence your application. A larger deposit can also enhance your attractiveness as a borrower by reducing the lender’s risk.
Consulting with a mortgage broker experienced in handling fixed-term contract applications can be beneficial. Brokers can help match you with lenders who are more flexible with their criteria and can provide guidance on improving your application.
Overall, while getting a mortgage with a rolling fixed-term contract is more complex, demonstrating consistent income, job stability, and preparing thoroughly can significantly increase your chances of approval.
Securing a mortgage on a fixed-term employment contract can be challenging, but with the right preparation, it is achievable. Here are the steps to improve your chances:
Consistent employment history: Show a stable work history with minimal gaps between contracts. Lenders prefer applicants who have been consistently employed in their field.
Contract renewals: Provide evidence of past contract renewals or a letter from your employer indicating the likelihood of renewal. This reassures lenders about future income stability.
Proof of income: Collect recent payslips, P60 forms, and bank statements showing your income and employment continuity.
Employment contracts: Present your current and previous contracts to demonstrate a consistent work pattern.
Employer letter: Obtain a letter from your employer confirming your employment status and prospects for contract renewal.
Good credit score: Maintain a healthy credit score by paying bills on time and managing debts effectively. A higher credit score improves your mortgage prospects.
Save for a larger deposit: A larger deposit reduces the loan-to-value ratio, making you a less risky borrower in the eyes of lenders.
Expert advice: A broker experienced with fixed-term contracts can guide you to lenders who are more flexible with their criteria.
Lender matching: Brokers can match you with lenders who have favourable terms for applicants with fixed-term contracts.
Minimum contract duration: Some lenders require a minimum of 6 to 12 months remaining on your current contract. Longer contract lengths are generally viewed more favourably.
By following these steps, you can improve your chances of obtaining a mortgage on a fixed-term employment contract. Consulting with a knowledgeable mortgage broker can provide additional guidance tailored to your specific situation.
Lenders have specific criteria for granting mortgages to individuals on fixed-term contracts, focusing on several key areas beyond those previously mentioned:
Certain sectors are viewed more favourably due to their perceived stability. For example, IT, healthcare, and education professionals on fixed-term contracts might find it easier to secure a mortgage compared to those in less stable industries.
Lenders may consider how long you have been working in your current industry or role. Consistent work within the same field can indicate reliability and job security.
Some lenders assess the overall demand for your profession. High demand for your skills can positively impact your mortgage application, as it suggests better job security and future income stability.
The specifics of your contract, such as the nature of the work, payment terms, and contract duration, play a crucial role. Detailed contracts with clear terms are preferred, as they provide better clarity on your income and job stability.
Lenders use income multiples to determine how much you can borrow. This is often around 4.5 to 5 times your annual income. The stability and predictability of your income from fixed-term contracts influence this calculation.
Lenders will assess your existing financial commitments, such as loans and credit cards, to ensure you can manage additional debt. A lower debt-to-income ratio improves your chances of mortgage approval.
By considering these criteria and preparing thoroughly, you can enhance your prospects of securing a mortgage on a fixed-term contract. Consulting a specialised mortgage broker can also provide valuable insights and assistance.
Yes, there are specialist lenders in the UK that cater to individuals on fixed-term contracts.These lenders often take a more nuanced approach to assessing applications, considering factors like the applicant’s overall employment history, the frequency of contract renewals, and the stability of their income. Examples include Bluestone Mortgages and Kensington Mortgages, which are known for their flexibility with self-employed and contract workers.
Using these specialist lenders or brokers can significantly increase the chances of securing a mortgage, as they understand the complexities of fixed-term contracts and have tailored products to suit these needs.
To get a mortgage on a fixed-term contract, you will need to provide several key documents to demonstrate your financial stability and employment history. Here’s a list of the typical documentation required:
Valid passport or driving license.
Utility bills, bank statements, or council tax bills that show your current address. Note that documents used for proof of identity cannot double as proof of address.
Copies of your current and previous fixed-term contracts. These help demonstrate your employment stability and the likelihood of contract renewals.
A letter from your employer confirming your employment status, contract length, and the likelihood of renewal. This reassures lenders about your future income prospects.
Recent payslips (typically the last three months) and P60 forms or tax returns for the previous two years. These documents verify your income and employment history.
Bank statements for the past three to six months to show your income, regular expenses, and financial management. This helps lenders assess your ability to manage monthly mortgage payments.
A current credit report to provide lenders with an overview of your credit history and financial behaviour. A strong credit score can significantly improve your mortgage application prospects.
By preparing these documents, you can improve your chances of securing a mortgage on a fixed-term contract. Consulting with a mortgage broker can also help ensure you meet all the necessary requirements and find the best mortgage deal for your situation.
The amount you can borrow on a fixed-term contract depends on several factors, including your income, employment history, and the specific criteria of the lender. Generally, lenders will calculate how much you can borrow using a multiple of your annual income. Here are some key points to consider:
Most lenders use income multiples to determine borrowing capacity, typically around 4.5 to 5 times your annual income. For example, if you earn £40,000 annually, you might be able to borrow between £180,000 and £200,000.
Lenders will look at your employment history to assess stability. A consistent track record of employment with minimal gaps and regular contract renewals can positively influence the amount you can borrow.
The length of your current contract and the likelihood of renewal are crucial. Having a contract with more than six months remaining or evidence of continuous employment in the same field can enhance your borrowing potential.
Your existing financial commitments, such as loans and credit cards, will also be considered. Lenders will assess your overall debt-to-income ratio to ensure you can manage additional mortgage repayments.
A strong credit score can increase the amount you can borrow, as it demonstrates financial responsibility and reduces the lender’s perceived risk.
By maintaining a stable employment history, ensuring a good credit score, and demonstrating continuous income, you can maximise the amount you can borrow on a fixed-term contract. Consulting with a mortgage broker can provide a more personalised assessment and help you find lenders who are more flexible with fixed-term contracts.
For individuals on fixed-term contracts in the UK, several mortgage options are available that can cater to their unique employment circumstances. Here are some of the best options:
Specialist lenders are known for their flexibility in dealing with non-standard employment types, including fixed-term contracts. These lenders assess applications on a case-by-case basis and often have more lenient criteria compared to traditional high-street banks.
Some high-street banks, like Halifax and Santander, offer specific mortgage products for individuals on fixed-term contracts. These banks may have dedicated products with tailored criteria that consider the nuances of fixed-term employment, making them a viable option for many applicants.
Working with a professional mortgage broker can be highly beneficial. Brokers have access to a wide range of lenders, including those that specialise in fixed-term contract mortgages. They can help match your financial situation with the most suitable lenders, increasing your chances of approval.
Consider government schemes like Help to Buy and Shared Ownership. These schemes can make it easier to secure a mortgage by reducing the amount of deposit needed or offering shared ownership options, which can be particularly beneficial for fixed-term contract workers looking to get onto the property ladder with a smaller upfront investment.
Fixed-rate mortgages can offer stability in monthly repayments, which can be appealing to those on fixed-term contracts. Knowing your exact repayment amount each month can help with budgeting and financial planning, especially if your contract renewals are predictable.
By exploring these options and seeking professional advice, individuals on fixed-term contracts can find mortgage solutions that suit their specific needs and circumstances.
Learn more: Mortgage for contractors
Yes, you can remortgage on a fixed-term contract. Lenders consider several factors when assessing your eligibility, such as the stability and continuity of your employment history. Demonstrating a consistent income stream and minimal gaps between contracts can significantly improve your chances of approval. Lenders are particularly interested in whether you have a history of contract renewals or the likelihood of future contracts, which can reassure them about your income stability.
When applying for a remortgage, it’s essential to provide comprehensive documentation, including recent payslips, bank statements, and current employment contracts. Lenders may also require a letter from your employer confirming your employment status and the likelihood of contract renewal. If your contract is nearing its end, having a strong history of renewals or a confirmed future contract can be beneficial.
Consulting with a mortgage broker who has experience with fixed-term contracts can help you find lenders more receptive to your employment situation. Brokers can guide you through the application process and match you with lenders offering competitive rates for remortgages on fixed-term contracts.
To calculate how much you can borrow on a fixed-term contract mortgage, you can use online mortgage calculators specifically designed for this purpose. Here are some steps and resources to help you estimate your borrowing capacity:
Collect details about your annual income from your fixed-term contract, including any additional income sources.
Use specialised mortgage calculators that consider fixed-term contracts.
Enter your annual income, contract length, and any additional financial details required by the calculator.
Some calculators allow you to input details about your employment history and the stability of your income, which can affect the borrowing amount.
The calculator will provide an estimate of how much you can borrow based on the details you have entered.
Using these tools can give you a good starting point to understand your borrowing potential. For a more accurate and personalised assessment, consider consulting with a mortgage broker experienced with fixed-term contracts. They can help you navigate the complexities and find the best mortgage deals available.
When comparing fixed-term contracts to permanent contracts in the context of obtaining a mortgage in the UK, several key differences can affect your application:
Lenders generally view permanent contracts as more stable and lower risk due to the absence of a predetermined end date.
Permanent employees are often perceived as having a more predictable income, which aligns with lenders’ preference for financial stability.
Fixed-term contracts have a specified end date, which can raise concerns about future income stability for lenders.
Lenders may see fixed-term contracts as higher risk, requiring more extensive proof of consistent income and employment history to mitigate perceived uncertainties.
Typically require standard documentation such as proof of income (payslips), bank statements, and credit history.
The application process may be more straightforward due to the perceived job security associated with permanent roles.
Require additional documentation to prove financial stability, including current and past contracts, employer letters confirming the likelihood of renewal, and detailed income records.
Applicants may need to demonstrate a longer history of consistent employment and minimal gaps between contracts.
Lenders generally have well-established criteria for evaluating applications from permanent employees.
There is usually greater access to a wider range of mortgage products and potentially better interest rates.
Lenders may apply stricter criteria, including assessing the length of the current contract and the frequency of renewals.
Some lenders and products are specifically designed to accommodate fixed-term contract workers, but these may come with higher interest rates or require larger deposits.
Borrowing capacity is typically straightforwardly calculated based on a multiple of the annual salary.
Generally, borrowers can secure amounts up to 4.5 to 5 times their income, depending on the lender and individual circumstances.
Borrowing capacity might be assessed more conservatively, with lenders considering the entire employment history and future income potential.
Consistent contract renewals and a strong financial history can help improve borrowing capacity, but some lenders may still offer lower multiples of annual income.
Securing a mortgage on a fixed-term contract is possible but often more challenging compared to permanent employment. Lenders perceive fixed-term contracts as higher risk due to their temporary nature. As a result, applicants may face stricter lending criteria, such as providing detailed employment history, contract renewals, and proof of consistent income. The advantage is that if you can demonstrate financial stability and meet the lender’s criteria, you can get on the property ladder sooner rather than later, potentially benefiting from property appreciation.
Saving for a larger deposit can significantly improve your mortgage prospects. A bigger deposit reduces the loan-to-value (LTV) ratio, making you a more attractive borrower to lenders. This can lead to better interest rates and more favourable mortgage terms. Additionally, having a larger deposit can help mitigate the perceived risks associated with fixed-term contracts, potentially broadening your choice of lenders and products. The downside is that it may take considerable time to save up a substantial deposit, during which property prices may rise, making it harder to achieve your homeownership goals.
The best option depends on your individual circumstances and financial goals. If you have a stable fixed-term contract, a strong employment history, and can meet the stringent documentation requirements, pursuing a mortgage might allow you to capitalise on current property prices and start building equity sooner. However, if your contract is less stable or you struggle to meet lenders’ criteria, focusing on saving for a larger deposit can enhance your mortgage options and potentially secure better terms in the future.
Consulting with a mortgage broker can provide personalised advice and help you navigate the complexities of either path.
Yes, having a guarantor can significantly help you get a mortgage on a fixed-term contract. A guarantor provides additional security for the lender, as they agree to cover the mortgage payments if you are unable to do so. This reduces the lender’s risk, making them more willing to approve your mortgage application even if your employment situation is seen as less stable.
A guarantor is typically a close family member or a trusted friend with a strong financial standing and good credit history. Their involvement can reassure lenders about the repayment security, potentially leading to better mortgage terms and higher borrowing limits.
However, it’s important to note that the guarantor must meet the lender’s criteria, which often includes having sufficient income or assets to cover the mortgage payments if necessary. Additionally, the guarantor’s creditworthiness will be scrutinised, and they must understand the financial commitment involved, as their own financial situation could be impacted if they need to step in to cover payments.
Using a guarantor can be particularly beneficial for those on fixed-term contracts who might otherwise struggle to secure a mortgage due to perceived income instability. It can make the difference between approval and rejection or between less favourable and more favourable terms.
Getting a mortgage on a fixed-term contract in the UK comes with several challenges:
Lenders typically view fixed-term contracts as less stable compared to permanent employment, leading to concerns about future income security. This perception can make lenders more cautious, requiring additional proof of consistent income and contract renewals to mitigate the perceived risk.
Applicants on fixed-term contracts often face stricter lending criteria. Lenders may require more comprehensive documentation, such as detailed employment histories, evidence of past contract renewals, and letters from employers confirming the likelihood of future contracts. These requirements are aimed at ensuring the applicant’s financial stability despite the temporary nature of their employment.
To offset the higher risk, lenders might require a larger deposit from applicants on fixed-term contracts. A higher deposit reduces the loan-to-value (LTV) ratio, making the mortgage less risky for the lender. This can be a significant hurdle for those who have not saved a substantial amount.
Not all lenders are willing to work with fixed-term contract workers. This limitation means applicants may have fewer mortgage products to choose from, often leading them to specialist lenders who might offer less favourable terms or higher interest rates.
Lenders will closely examine the applicant’s credit history. A strong credit score can help alleviate some concerns about income stability, but any issues with creditworthiness can further complicate the approval process.
Getting a mortgage on a fixed-term contract in the UK can be challenging, but following these tips can improve your chances:
Consistent employment history: Show a continuous work history with minimal gaps between contracts. This indicates reliability and job stability to lenders.
Contract renewals: Provide evidence of previous contract renewals or letters from employers confirming the likelihood of future renewals.
Income proof: Submit recent payslips, P60 forms, and bank statements to verify your income and financial stability.
Employer letters: Obtain letters from your employers detailing your job role, contract length, and prospects of renewal. This reassures lenders about your ongoing employment.
A larger deposit reduces the loan-to-value (LTV) ratio, making you a less risky borrower and increasing your chances of mortgage approval. Aim for at least a 10-15% deposit.
Ensure you have a good credit history by paying bills on time, reducing debt, and regularly checking your credit report for errors. A strong credit score can enhance your application.
Work with a broker who is experienced with fixed-term contracts. They can guide you to lenders who are more flexible and have suitable mortgage products for your situation.
Certain professions and industries are perceived as more stable. If you work in a high-demand field like healthcare or IT, emphasise this in your application.
Be ready for detailed questions about your employment history and future prospects. Having thorough documentation and a clear narrative about your job stability will help.
Having a guarantor can reassure lenders and improve your chances of mortgage approval. Ensure the guarantor has a strong financial standing and understands the commitment.
By following these tips and preparing thoroughly, you can enhance your chances of securing a mortgage on a fixed-term contract.
Yes, using a mortgage broker can be highly beneficial if you have a fixed-term contract. Here are several reasons why:
Mortgage brokers often have access to a wide range of lenders, including those that specialise in non-traditional employment situations like fixed-term contracts. These lenders may not be as easily accessible to the general public and often have more flexible criteria that can better accommodate your employment status.
Brokers experienced with fixed-term contract mortgages understand the unique challenges you face. They can provide tailored advice on how to strengthen your application, what documentation you need, and how to present your employment history to lenders in the best possible light.
By matching you with lenders who are more likely to consider your application favourably, brokers can increase your chances of getting approved. They know which lenders are more lenient with fixed-term contracts and can help you navigate the specific requirements each lender has.
The mortgage application process can be complex and time-consuming, especially when dealing with fixed-term contracts. A broker can streamline the process, handle much of the paperwork, and communicate with lenders on your behalf, saving you time and reducing stress.
Brokers can help you secure more competitive rates by shopping around on your behalf. They can leverage their relationships with lenders to negotiate better terms and interest rates than you might be able to achieve on your own
A mortgage broker provides personalised service tailored to your financial situation and goals. They can offer insights and recommendations that are specific to your needs, helping you make informed decisions throughout the mortgage process.
Yes, it is generally harder to get a mortgage on a fixed-term contract in the UK than a permanent position. Lenders often view fixed-term contracts as less stable due to their temporary nature, which can raise concerns about future income stability. This perceived risk means lenders may apply stricter criteria, such as requiring more comprehensive documentation, evidence of contract renewals, and a larger deposit.
However, many lenders do offer products for fixed-term contract workers, especially if you have a consistent employment history and can demonstrate financial stability.
The length of your fixed-term contract is an important factor for lenders. Ideally, your current contract should have at least 6 to 12 months remaining. Having a longer remaining contract period can reassure lenders about your income stability. Additionally, a history of consistent contract renewals can strengthen your application. Some lenders may be more flexible if you can provide evidence of a stable employment history and minimal gaps between contracts.
Yes, it is possible to get a mortgage with a rolling fixed-term contract in the UK. Lenders will consider the frequency of your contract renewals and the overall stability of your employment. Demonstrating a history of consistent renewals and providing documentation that confirms the likelihood of future renewals can significantly improve your chances. Some specialist lenders and mortgage brokers are particularly well-suited to help applicants with rolling contracts find suitable mortgage products.
Getting a mortgage with a fixed-term contract can affect the interest rate. While it doesn’t automatically mean higher rates, the perceived risk associated with fixed-term contracts might lead some lenders to offer slightly higher rates compared to those available to permanent employees. However, if you have a strong employment history, a good credit score, and can provide comprehensive documentation, you may still be able to access competitive interest rates. Working with a mortgage broker can help you find the best rates tailored to your specific situation
If your fixed-term contract ends, it does not directly impact an existing mortgage. The key concern is whether you can continue making your mortgage payments. If you secure a new contract or permanent employment without significant gaps, there should be minimal impact. However, if there is a significant gap or loss of income, it could strain your finances, making it difficult to meet mortgage payments. Communicating with your lender is crucial if you foresee issues, as they may offer solutions like payment holidays or restructuring your mortgage to prevent default.
Waiting for a permanent job before applying for a mortgage can make the process easier and potentially offer better terms. Permanent employment typically provides more income stability, which lenders favour. However, if you have a stable fixed-term contract history, good financial management, and sufficient documentation, you can still secure a mortgage. Deciding whether to wait depends on your current financial situation, the stability of your fixed-term employment, and how urgently you need to purchase a property.
Yes, several government schemes can help individuals on fixed-term contracts get a mortgage:
Help to Buy:
This scheme offers equity loans to help with the purchase of a new-build home. It reduces the initial deposit required, making it easier for those with fixed-term contracts to buy a home.
Shared Ownership:
This allows you to buy a share of a property (between 25% and 75%) and pay rent on the remaining share. It can lower the deposit and mortgage amount needed, making homeownership more accessible.
Lifetime ISA:
While not a mortgage scheme, this savings account offers a government bonus on savings used to buy your first home, which can help build a larger deposit.
These schemes can make it easier for fixed-term contract workers to save for a deposit and secure a mortgage.
Consulting with a mortgage broker can also help you navigate these options and find the best fit for your situation.
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