Contractor Mortgages vs. Self-Employed Mortgages: What’s the Difference?
Contractor Mortgages vs. Self-Employed Mortgages: What’s the Difference?
Blog Article
Many contractors assume they fall under the same category as the self-employed when it comes to mortgages—but that’s not always the case. While both groups work independently, lenders often assess them differently, especially if you’re on a fixed-term contract.
Let’s break down the key differences.
How Lenders View Contractors
Contractors typically:
Work on fixed-term contracts (often 3, 6, or 12 months)
Are paid a daily or hourly rate
Operate through a limited company, umbrella company, or as sole traders
Instead of looking at company accounts or self-assessment figures, many specialist lenders assess contractor income based on your current contract rate, not just your previous tax returns.
Example: £400/day × 5 days/week × 48 weeks = £96,000 annual income
This can result in a higher borrowing capacity compared to traditional self-employed assessments.
How Lenders View Self-Employed Applicants
Self-employed applicants include:
Sole traders
Company directors (especially if they take income via salary and dividends)
Business partners
For self-employed mortgages, lenders usually require:
2+ years of accounts
SA302s and Tax Year Overviews from HMRC
Proof of consistent income
They typically average your income over the past 2–3 years, which can sometimes limit borrowing power—especially if your recent income has gone up.
Why the Difference Matters
If you’re a contractor and apply through a lender that treats you like a typical self-employed borrower, you might:
Be offered less money
Face more paperwork
Be turned down due to limited trading history
That’s why it’s crucial to work with a broker who understands contractor mortgages and can connect you with the right lender.
Final Thoughts
While contractors are technically self-employed, the mortgage process is different. Lenders who understand contracting can offer more flexibility, higher borrowing, and faster approvals.
At Contractor Mortgage Solutions, we help you navigate this distinction to find the best mortgage for your situation.