Getting a mortgage when you are on a zero hour contract can be a little more difficult than when you have a fixed number of hours contracts. The key is to be able to show a steady income and proof you can afford to pay for the mortgage. There are lenders who will consider this type of income and as a mortgage broker, we can work with them to get you what you need.
In this guide, we will look at a few key questions on the topic:
- What is a zero hour contract?
- How do lenders view them?
- Deposit and equity levels
- Zero hour contract lenders
- Your credit history
- Buy to let with zero hour contracts
What is a zero hour contract?
Zero hour contracts are where you have no guarantee of a set number of hours per week from your employer and you are paid for the hours that you work. This means that employers can call with little or no notice and are not required to guarantee that you have work each week.
There’s general negativity in the media about them but they do work for some people. Students, retired people who want a little extra work and people who have multiple jobs can find the flexibility involved suits them.
How do lenders view them?
Because there’s no guarantee of work, some lenders don’t view them as favourably as other work options. This means you could be seen as a higher risk and more likely to miss your mortgage payments if you don’t get any work.
- How long have you had the zero hours contract – most lenders will look at least 12 months continuous employment on the contract
- Experience prior to this contract – if you have been working for a long time in your industry, this can help with lenders
- Sector or role – some professions may have a shorter period to be considered such as doctors, nurses or barristers
Some lenders simply won’t consider a zero hour contract, but others have a wider scope to accept them and will look at the criteria above to help make a decision. And even if some lenders won’t accept it, as brokers we have plenty of others to consider it.
Deposit and equity
Some lenders may be able to consider you with as little as a 5% deposit for a zero hours contract mortgage. However, if you have any bad credit issues, they may want around 15% deposit, sometimes more. If you have equity in the house and are looking to remortgage, this may make the situation a little easier.
Zero hours contract mortgage lenders
In our experience, we tend to find that there are quite a few lenders that will consider a zero hours contract income, but they tend not the be the high street lenders. These are specialists who accept a wider range of circumstances than high street banks and building societies. They don’t usually deal directly with customers, so you need a mortgage broker to be considered by them.
Zero hours contract and bad credit
If you have a combination of being on a zero hours contract and having some bad credit history, then the pool of lenders will be smaller but there’s still hope. There are lenders who will consider each case individually and will look at things like the type of problems, when they happened and how much deposit or equity you have. The older the credit issue, the less relevant it is.
The type of credit issue always plays a part. So late payments, a default, CCJs or a debt management plan are less severe than bankruptcy or a previous repossession. The latter may need a higher deposit to get approved. It is worth getting your credit report in order to see what issues are showing. You can get this for free from a number of sources.
Buy to let on zero hour contracts
Getting a buy to let mortgage on a zero hours contract can be tricky, either for first-time buyers or buy to let properties or for experienced landlords. Some may require a minimum personal income from employment or self-employment and have accounts, payslips or a contract to show this.
For a first time buy to let property, the criteria are often the same as a residential mortgage. Lenders will look for 12 months of continuous employment although some will consider less. For experienced landlords, the criteria may be more flexible and may not need proof of personal income at all if you have other properties.