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Author: Elliott Culley - Director & Mortgage Adviser of Switch Mortgage Finance
Fixed Term Contract Mortgage
If you are on a fixed term contract you can have some extra challenges when it comes to buying a house or remortgaging your property.
You may have approached a high street lender and been told you need to evidence a longer history as a fixed term contractor. All lenders criteria is different and just because one lender says no, it doesn’t mean a mortgage is not possible.
Some lenders will want to see a history of you working on a fixed term contract, whereas other lenders are more relaxed. It will completely depend on your personal circumstances which lender is best for you.
It is common to be employed by the NHS on a fixed term contract and many individuals take up these roles without realising the potential consequences when it comes to qualifying for a mortgage.
What is a Fixed Term Contract?
A fixed term contract is when an employed individual has a contract in place with a company which has a set start and end date. Mortgage lenders will see this type of employment as not permanent and as a result some lenders have different criteria.
Can I Get a Mortgage on a Fixed Term Contract?
Yes, there are mortgage lenders that consider applicants with fixed term contract income. Mortgage lenders have different criteria and you need to make sure you are applying to a fixed term contract mortgage friendly lender that fits your circumstances.
Do I Need To Have a History of Fixed Term Contract Work Before Getting a Mortgage?
It is not necessary to have a long history of fixed term contracting to obtain a mortgage. If you went into your local high street lender they would tell you to come back once you have a history of 2 years of working on a fixed term contract basis before they will consider you.
As a result lots of people think they can’t qualify for a mortgage and wait two years when in fact qualifying for a mortgage is possible.
There are plenty of lenders offer more lenient criteria. We work with lenders that can potentially consider you from as little as 1 month, provided you were working in an employed role before. If you weren’t employed before, then you can be considered after 3 months.
We even work with one lender that can consider you before the fixed term contract has even started.
The more history you have the more mortgage lender options you will have, and you need to ensure you apply to a mortgage lender right for your circumstances.
Real Case Scenario
A client came to us after having their mortgage with Halifax declined due to the time they had been fixed term contracting. The client was only 1 month into her first fixed term contract with the NHS after graduating and wanted to purchase a shared ownership property. We were able to find a lender that would consider shared ownership and the client’s short history of fixed term contracting.
How Long Do You Need Left on a Fixed Term Contract to Get a Mortgage?
The minimum time left on a fixed term contract will be 3 months. In this scenario a mortgage lender would want to see a renewal contract in place, or evidence of a new fixed term contract if you are moving companies.
If you have more than six months remaining on your fixed contract at the time you apply you will have a wider array of lending options.
Can you Remortgage on a Fixed Term Contract
Yes, when it comes to completing a remortgage, if you are on a fixed term contract, or you have recently moved onto a fixed term contract, it will be possible to complete a remortgage.
You may be concerned that your current lender may not accept your new income structure, however your existing lender should be able to offer you a new deal on a like for like basis.
If you do need to move lender, you should not be concerned about this either, as there are many lenders in this market space that will be able to help you and the majority of the time they will be providing competitive interest rates.
Speak to an Expert!
Contact us today for expert advice and guidance on your unique mortgage and property needs. We will work with you on a one-on-one to basis to help you find the right solution for your needs.
With our experience you can rest assured that you are in good hands when it comes to securing the financing you need for your property.
Does my Fixed Term Contract Need to be for at Least 12 Months?
The majority of mortgage lenders will want you to have a 12 month contract in place. If you do have a shorter contract of either 3 or 6 months, there are lenders that will consider you. You will need to show you have had the contract renewed at least once and have a 12 month total history of fixed term contracting.
If you work in a professional capacity such as a junior doctor, lenders are aware of your rotational contracts and you can be considered without a 12 month history.
Fixed term contract mortgages for junior doctors
As a junior doctor you will most likely be on a fixed term contract. Some mortgage lenders provide special mortgage products for junior doctors which are designed to be more lenient and allow junior doctors to borrow larger mortgages. These specific products don’t require a 12 month history of being on a fixed term contract and the lenders are more aware of the specifics of your contracts such as shorter rotational contracts.
Real Case Scenario
A client came to us after having his mortgage declined by Nationwide. The client had started his first fixed term contract role in the NHS and had been in the role for three months. We were able to secure a mortgage for the client with a competitive mortgage lender within 2 days. The mortgage lender was happy to accept the short history of working on a fixed term contract due to the history of fixed term contracts used in the NHS.
Can I get a Mortgage on a Zero Hours Contract?
If you are on a zero hours contract you can certainly get a mortgage. For the majority of lenders you will need to show a 12 month history of being on a zero hours contract. However we do have access to some lenders that are happy with 6 months, provided you have been in continuous employment for 2 years.
If you are a construction industry scheme contractor we have a separate page for this type of zero hours contract.
Do You Need to Have Had a Contract Extension to Get a Fixed Term Contract Mortgage?
No there are lenders that are happy without seeing evidence of a contract renewal. It will depend on how close you are to the current contract expiring.
If you are less than 3 months away from your contract expiring, then you will need to provide evidence.
If you are able to provide proof of a contract extension/renewal, then you will have more options available to you.
How Much Can You Borrow With a Fixed Term Contract Mortgage?
Mortgage lenders start at 4.49x your annual income. They will also take into account any dependents, credit commitments and student loans you may have when calculating your borrowing capacity.
Higher loan to income multiples can be possible depending on your overall salary. If you have a higher salary of roughly £70,000+ you could obtain a higher income multiple of 5-5.50x.
Can You Get a Fixed Term Contract Mortgage Before the Contract Begins?
Yes. Depending on your personal circumstances there are mortgage lenders that can offer mortgages to clients who have not started the contract yet. This is mainly offered to clients in professional roles such as trainee solicitors, junior doctors and newly qualified teachers, but can be possible for anyone on a fixed term contract.
Are Interest Rates Higher For Fixed Term Contract Mortgages?
No, fixed term contractors can get the same rate as any other employed person. You do need to fit the criteria of the lender. If you have very specific circumstances you may find you won’t be able to access the lowest rates, but all rates for fixed term contractors are competitive.
What Deposit do I Need for a Fixed Term Contract Mortgage?
You will be able to get a mortgage with as little as 5-10% deposit. A larger deposit will mean you can access lower interest rates. A larger deposits of around 10-15% will be needed if you are buying a new build property or flat.
What Documents Will I Need to get a Mortgage?
If you are on a fixed term contract you will need to provide your latest payslips, a copy of your contract and potentially your renewal letter if you are close to the end of your current contract.
If you want to use any overtime as part of your income for the mortgage then you will also need to provide a p60.
Will Gaps in my Work History Cause a Problem?
Any gaps will need to be explained. Most mortgage lenders will want to see consistency in your job history, so they can be content you will be able to maintain the mortgage payments.
Can I get a Mortgage as a First Time Buyer?
Yes, there are many mortgage lenders who are happy to offer mortgages to first time buyers on fixed term contracts. You just need to make sure you apply to the mortgage lender that suits your personal circumstances.
Can I Get a Buy to Let Mortgage as a Fixed Term Contractor?
Yes it is certainly possible to obtain a buy to let mortgage if you are on a fixed term contract. Some mortgage lenders do have a minimum income of £25,000 per year that you will need to earn, but some require no minimum income at all.
If this is your first time being a landlord or you are a first time buyer, then there are some lenders that will not consider you, but there are plenty that will.
Can I Get a Fixed Term Contract Mortgage With Bad Credit?
Yes it is possible to get a mortgage even with bad credit. It would completely depend on the severity of the bad credit, as well the time you have been on the fixed term contract. There are many specialist lenders that will consider you so we would always advise getting in contact to discuss your options.
Mortgages for Fixed Term Contractors
It can be tough when looking at mortgages for fixed term contractors. Although mortgage lenders have different criteria, with some being more flexible than others, there will be a mortgage lender suitable for you.
Why Choose Switch to Help You?
Whether purchasing or remortgaging, you’ll want access to the best products on the market. We have a proven track record of helping clients with fixed term contracts and will be able to advise you on the best steps to take.
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