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Author: Elliott Culley - Director & Mortgage Adviser of Switch Mortgage Finance
The number of people in the UK on zero hours contracts has slowly increased year on year. There are over one million workers in the UK that are employed on zero-hour contracts. As this sector has grown so has the need for help for clients who need a zero hours contract mortgage.
If you work under a construction industry scheme then we have a dedicated page for this type of zero hours contract as you can be treated differently by mortgage lenders.
What is a Zero Hour Contract Mortgage?
There is no specific product as such, but a zero hours contract mortgage can be summed up by being a product offered by a mortgage lender which is designed to support you as a zero hours contractor.
Some high street lenders make it extremely difficult to obtain a mortgage if you are in this position and it may be you need to approach a specialist lender with zero hour friendly criteria.
Such lenders recognise the differences in working arrangements for zero-hours workers as opposed to employees with full-time contracts, so are more flexible with their criteria. This doesn’t mean you will be automatically approved for a mortgage, but your chances of approval will be higher with a specialist lender than those mainstream lenders who won’t consider a zero-hours contract income.
Can you get a Mortgage on a Zero Hour Contract?
Yes, it is possible to get a mortgage on a zero-hours contract, but as some lenders will consider you to be a high-risk borrower, they won’t lend to you unless they are satisfied you have the financial ability to make your mortgage repayments.
Most lenders are looking for consistency, how long have you been on a zero hours contract? Do you have employment gaps? Have you just started a zero hours contract. The more history and consistency you have will increase your options with mortgage lenders.
Is it Hard to Get a Mortgage on a Zero Hour Contract?
It can be difficult to obtain a mortgage whilst on a zero hour contract. Not all lenders treat your income the same way and some have concerns you don’t have a steady income stream. However, there are lenders that specialise in this field, so it is possible for you to get a mortgage on a zero-hour contract.
How to get a mortgage on a zero hour contract?
To give yourself the best opportunity of getting a mortgage on a zero hour contract you will need to be in the role for at least 12 months. This will give you a wider option of mortgage lenders.
You need to be prepared and ensure you apply to the right lender from the start. Some mortgage lenders don’t take zero hour contract income or won’t use 100% of the income, so the last thing you want to do is start applying with the lender not suitable to your circumstances. This could waste time and potentially damage your credit score.
Use the knowledge of a mortgage expert to make sure you are in the best possible position.
Mortgage lenders for zero hours contract
There are over 40 different mortgage lenders that accept zero hours contract workers, but not all will treat your income the same way and there are some lenders who are much better than others.
At the time of writing, mainstream lenders including NatWest, Halifax, Barclays, and Santander will take zero hour contract income, but that doesn’t necessarily
mean they are the right lender for you.
There are some lenders you may want to avoid. For example Nationwide will not accept a zero hours contract if it is the sole income of an application whereas, Leeds Building Society do not consider this income at all.
There are some great mortgage lenders available, but which is the best for you will depend on your personal circumstances. Your mortgage application needs to be packaged correctly to get the best deal.
Do I Need a Permanent Contract to get a Mortgage?
No you don’t need a permanent contract to obtain a mortgage. A permanent contract will certainly increase your options, but is not required to secure a mortgage. There are many lenders that will consider you on a temporary contract, provided you can show at least 12 months history of temporary work.
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.
How Long do you Need to be in a Zero Hour Contract Role to get a Mortgage?
The minimum lenders want to see is 6 months continuous employment in the same role. However there are not many lenders that accept only 6 months. Most mortgage lenders want to see at least 12 months. Some lenders can require 2 or even 3 years, depending on your circumstances you may need to avoid these lenders.
The longer you have been working as a zero hour contractor the more choice you will have, but do not be put off if you have less than 12 months, it is certainly possible.
What Deposit do I Need for a Zero Hour Contract Mortgage?
It is possible to obtain a mortgage with a 5% deposit as a xero hours contractor. However, some lenders do place restrictions on deposits and will require a higher amount; up to 20% in some cases. A lower deposit the higher the interest will be, so if you can increase your deposit you will be able to obtain a cheaper mortgage.
If you are looking at purchasing a flat, or new build property, you will need to put down more deposit of around 10-15%.
Is it More Expensive to get a Mortgage as a Zero Hour Contractor?
Zero hour contract mortgages won’t necessarily cost you more, but because it’s more difficult to be accepted by mainstream lenders, this can impact how favourable (cheap) the rates you’re offered are.
If you approach lenders specialising in these sorts of mortgages, you may be able to secure just as good a rate as someone in permanent employment. Other factors, such as deposit size and credit history, can also impact how expensive your mortgage is.
How Much Can I Borrow for a Mortgage on a Zero Hour Contract?
Most mortgage lenders will use 4.49x your annual gross salary as a starting point. However some mortgage lenders do not use 100% of your income as a zero hour contractor, so you want to make sure you approach a lender that will use a 100% of your income.
The total borrowing figure will reduce if you have credit commitments like a car loan or credit card. The figure could also reduce depending on how many children you have or adult dependents that may live with you.
What Documents Will a Mortgage Lender Ask For?
Mortgage lenders have different requirements, however the most common documents you will need to provide would include:
- A copy of your Contract
- At least 3 months payslips, but could be up to 12 months worth
- 3 months bank statement
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 Zero Hour Contract Mortgage as a First Time Buyer?
Yes, there are many mortgage lenders who are happy to offer mortgages to first time buyers on zero hour 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 Zero Hour Contractor?
Yes it is certainly possible to obtain a buy to let mortgage. If you are on a zero hours 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 first time buyer, then there are some lenders that will not consider you, and you will want to make sure you apply to the correct lender by using a mortgage broker.
Can I Get a Zero Hour 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 a zero hour contract.
There are many specialist lenders that will consider you, however you will need at least 12 months continuous employment before you could be considered. If you are not sure on your credit situation and whether it could affect your mortgage chances, then we would advise to get in contact with us.
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 zero hour contract income and will be able to assist you with your mortgage needs.
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