When you only have temporary contract work, it can seem as if the world of a mortgage is one that is closed to you. But this isn’t completely true – while some lenders won’t consider you, there are others who will. Mortgage brokers can find lenders who will consider temporary jobs and agency workers to get a mortgage for a house.
In this guide we will cover:
- Temporary contract types
- Lending criteria for temporary contracts
- How much will you be able to borrow?
- Is there any help available?
Temporary contract types
There are four main types of temporary contracts and each is treated a little differently when it comes to getting a mortgage. You can still get a lender who will consider all of these situations, but they will still look at affordability as with any other income type to make sure you can afford the monthly repayments.
Fixed term contract
With a fixed term contract, there is a specific start and end date for the employment. Some will be connected to a specific task or project and end when this does. In this situation, lenders will want to see a previous history of work to consider you.
Temporary agency workers
Temporary workers at agencies are similar to fixed-term contracts – the contract lasts for a specific period relating to a project or task, but the date may be changeable. Lenders may be able to consider you depending on your other details.
Short term contract
Short term contracts come in varying lengths and are more focused around a project so include the specifics of the role as well as the length. A track record of previous employment is important for mortgage lenders in this situation.
Probationary periods are common when you first start a job and can be 3-6 months, sometimes as long as one year. Some employers off less favourable terms during this period and this can make lenders a little more cautious. But others are willing to consider you even when you are in your probationary period.
Lending criteria for temporary contracts
As with all types of mortgage, there are lender criteria and situations that have an impact on whether a company will accept you or not.
The main issue with temporary or short term contracts is that the mortgage company has to be certain you can afford the mortgage. There’s a risk involved if you don’t make your payments and they have responsibilities around checking affordability. But different lenders have different criteria, and some are more lenient than others – which is why working with a mortgage broker is a good idea.
Your role can play a part in whether a lender will accept you or not. Whether it is true or not, lenders see some roles as more ‘stable’ than others based on your skill level or qualifications. So someone in a low skilled, labour intensive role such as warehouses or construction will find fewer lenders available on temporary contracts than someone in higher skilled roles.
Length of the current contract
How long your contract is and how long it has left may also play a part in the decision. So if you have 6-12 months left in the contract or more, than it might be more acceptable to some lenders. Others may consider even three months remaining as long as it was at least 6 months when it started.
If you are in a casual role with no fixed term, the lender may want some evidence of similar roles for the last two years to show you have had a steady income in this job.
If you have had your contract renewed at least once with the employer, then this can work favourably with the lender. If your contract is due but you have confirmation from the employer in writing that it is being renewed, this can also count.
Time in the role
How long you have been in the role, even on fixed term contracts can also play a part. Some lenders look for at least 6 months in the role, others 12 months or more.
Time with employer or agency
How long you have been with the employer or agency can also be used to help make a mortgage decision. If you have been with them less than 12 months, some lenders might not consider you but if you have had a similar job before that, this might work instead.
Gaps in employment
Gaps in employment are looked at differently by different lenders. For example, some are happy with gaps of up to 4 weeks while others will look for only a week or two between jobs. They will also look at your previous work history to see how often these gaps occur.
How much will you be able to borrow?
Lending criteria remain much the same on any type of income. Some lenders will accept 4-5 times your annual income and have a maximum loan to value ratio of 95%. With temporary contracts, some will want a lower LTV or require 12 months or more continuous employment with no gaps. While it is more difficult than being on a permanent contract, there are still lenders who will help.
Is there any help available?
If you are on a temporary contract there are a couple of things you can to help improve your eligibility for the mortgage. Building a good credit history with a credit card that you pay off is a good step. And having a documented work history is also important to show where you have worked and how long for.
The deposit is also important and the bigger, the better. This reduces the LTV and makes the risk lower for the lender. So aim to have as much as possible before you apply for the mortgage.