Get in touch for a free initial chat – we’d love to help!
Get in touch
Applying for a mortgage can be a headache at the best of times. This can become even more challenging when you are on a fixed term contract. Many people we speak to who are looking for a fixed term contract mortgage are surprised at the hoops they need to jump through.
That said, the good news is that securing a mortgage on a fixed term contract is entirely possible.
In this guide, we’ll discuss some of the key lender criteria points to think about, the challenges that you may face and guidance on getting a fixed term contract mortgage.
When I say ‘fixed term contract mortgage’, this isn’t a specific mortgage type, but rather the term that people use when getting in touch with us.
So, what is it?
A fixed term contract mortgage is a product designed specifically for those who are employed on fixed term contracts, as opposed to permanent employment. In short, an employee who has a fixed start and end date.
While being on a fixed term contract may present some hurdles, you can usually access the same products that a permanently employed applicant can access. However, there’s typically specific criteria that needs to be met first.
Naturally, as fixed term contractors will have an end date for their current contract, lenders want to be satisfied that you’re not going to have a problem in getting a new contract. They want to be comfortable with the overall stability of your income.
Aside from their general criteria surrounding residency, credit history and so on, some examples of what lenders are looking at for fixed term contractors include:
Even if you pass these criteria, you may then also find that some lenders only use a percentage of your annual income.
At Rosehill, we take pride in building long-term relationships with our clients. We don’t see ourselves as just a mortgage broker, but rather a trusted partner who will be with you every step of the way.
At Rosehill, we take pride in building long-term relationships with our clients. We don’t see ourselves as just a mortgage broker, but rather a trusted partner who will be with you every step of the way.
This is another area which can vary widely from lender to lender.
If you pass the lender criteria for fixed term contractors, a general rule of thumb would be to take your annual earnings and multiply this by 4.5x. Some lenders may lend a little less and some a little more.
If you’re buying with someone, you can also add their income to this.
The good news is that you won’t automatically be stuck with a specialist lender with ultra-high rates compared to the open market.
Many mainstream lenders can consider fixed term contractors for a mortgage application, but each will have their own criteria.
Some of these mainstream lenders also have flexibility on certain criteria points too, such as allowing minimal time as a fixed term contractor, providing that there’s sufficient employment history in your line of work.
Ideally, lenders will want to see a minimal amount of gaps between contracts.
Certain lenders will have a specific maximum number of weeks that they’d allow between contracts within the last 1-2 years, for example no more than 4 weeks at a time. Others may look at each case on its own merits.
Some allow larger gaps than others.
They may also want to know the reason why there have been gaps between your contracts.
One example may be due to taking a holiday – some lenders may already account for this as standard by deducting a few weeks’ worth of pay from your earnings when calculating the income they are happy to use for the application.
A common example we find is where people have struggled to get a fixed term contract mortgage due to only having been contracting for a short period of time, typically less than 12 months.
However, even if a lender has declined an application on this basis, there are usually lenders who can then look at your overall experience in your field, or they can still consider if your current contract has a good amount of time left to run.
Certain lenders will want a minimum time remaining on your contract. This could be 6-12+ months in some circumstances.
However, if you have confirmation of a contract extension, this can be sufficient with certain lenders to proceed with a mortgage application.
Ideally you’d have the new contract lined up, but some lenders may consider a letter confirming a pending extension.
Securing a mortgage while on a fixed term contract is possible, but it requires a little more planning and preparation.
By understanding the challenges associated with fixed term contract mortgages and taking proactive steps to improve your financial standing, you can increase your chances of success. That’s where we think a mortgage adviser is worth their weight in gold.
As with most cases, criteria differs from lender to lender. If you’ve been declined with one lender, this doesn’t mean that all lenders cannot consider your application.
We focus on building long-lasting relationships with clients.
We therefore charge a reduced fee for our existing client remortgages.
Click here for more detail.
Access your credit report
As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments. Think carefully before securing any other debts against your home or property. The Financial Conduct Authority does not regulate commercial buy to lets and some forms of commercial mortgages. You may have to pay an early repayment charge to your existing lender if you re-mortgage
We typically charge a fee for our services, which is dependent on the amount of administration required. Please refer to our terms of business for further information.
The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK. The purpose of any content on this site is to provide technical and generic information and should not be interpreted as a personal recommendation or advice.
We aim to provide the best possible service to our clients. However, if you have a complaint that we’re unable to resolve, please see our complaints policy.
Rose Hill Financial Services Ltd is authorised and regulated by the Financial Conduct Authority. You can find us on the Financial Services Register https://register.fca.org.uk/ under reference 912303. Registered office address: 1 Bell Street, 2nd Floor, London, England, NW1 5BY. Registered in England and Wales. Company registration no: 11997519.
The content on this site is for information purposes only and does not constitute advice. Please seek independent financial advice before taking any action. We cannot be held responsible for the content of any external websites we link to within the content on our website.
We receive a small commission if you use our affiliate link with Checkmyfile. Rosehill Financial Services is not responsible for the accuracy of the information contained within the linked site. Checkmyfile provides a 30-day free trial and then the subscription is £14.99 a month thereafter. The trial or the subscription can be cancelled at any time.
