April 2024
Fixed Term Contract Mortgage in April 2024
Can I get a mortgage on a fixed term work contract?
Getting a mortgage can be difficult for contract workers. However, it is not impossible. Self-employed mortgages are out there, it might just be that not all mortgage providers offer them. Furthermore, mortgage providers may want to see more evidence of your employment circumstances and employment history if you are a contract worker. This might be frustrating, but mortgage lenders need to be assured you can afford a fixed term contract mortgage.
Topics that you will find covered on this page
You can listen to an audio recording of this page below.
The good thing is that you can still be eligible for a range of mortgage types, such as help to buy and buy to let. The difficult part is simply proving your affordability.
For temp agency workers and those on a fixed term contract, we really recommend using a mortgage advisor. Essentially, their financial advice can help you be successful when applying for a mortgage, such as a student mortgage, such as a student mortgage.
It is important to get advice so that your mortgage lending request is accepted first time. This is not only as it makes buying a home quicker. Each time clients apply for home mortgages, it shows up on the credit check.
So, clients applying for a mortgage should get financial advice, so they are accepted first time. If not, bad credit can make it harder to get accepted a second time round.
Here is a short video on the process for getting a mortgage.
What is meant by a fixed term contract?
A fixed term contract is a way of describing certain types of employment. If your current employment contract is due to end after a certain period of time, or after a specific piece of work is complete, you are likely on a fixed term contract.
You can read and find out more about fixed term contracts here.Essentially, they are any work contract that is not permanent.
Does being on a temporary contract affect mortgage?
Temporary work contracts can make it harder to receive mortgage lending. Fixed term contracts might limit your choice of lenders and mortgage conditions, such as interest rates and deposits.
However, if you can convince the lender you can afford repayments on your mortgage, there is no reason for you to not find a deal. You should still be able to access different plans, such as buy to let and help to buy.
To increase your chances of acceptance there are a few things you can do. Get started by finding an independent mortgage advisor. Their advice can save you a lot of money in the long-run, especially if you are a first time buyer.
You should also work hard to boost your credit score as much as possible. Bad credit is off putting to lenders, so make sure you pay off all your debts and credit cards on time.
Is it possible to get a remortgage if my current contract is fixed?
Sometimes people’s employment contracts change. If you are a worker that suddenly finds yourself on fixed term contracts, a remortgage may be challenging.
The very first thing you should do is chat to your lender about the remortgage. Then, if you decide these lenders are no longer a good fit for you, consult a broker. A broker will assist you to find a more appropriate mortgage for your home.
Like getting a mortgage, a remortgage on a temporary work contract can be harder to get. However, there are always options out there. If you can avoid getting bad credit, then your options will be better.
Will getting a guarantor help me get a mortgage ?
When it comes to temporary employment contracts, lenders may be sceptical as to whether you can afford your repayments long term. This makes people on such employment contracts more risky mortgage customers.
A guarantor is a person that will make your mortgage repayments if you fail to meet them. Normally these are relatives or a very close friend. Having a guarantor can, theoretically, make your application more appealing to lenders.
This is because, with a guarantor, lenders won’t be left out of pocket if you can’t pay off your home. However, the requirements can still be tricky to meet.
Essentially, most lenders want people with a temporary employment status to have a guarantor that could afford the entirety of the property value plus interest. Given the high cost of a home, few people have this cash sitting around.
So, getting a guarantor can help your mortgage application. But, finding a guarantor might bring practical difficulties.
What kind of documentation will I need to provide lenders?
Mortgage lenders will need to see the following in order to consider your application:
- A passport or driving license
- Proof of your address
- Your most recent CV
- Your most recent employment contract
- Recent bank statements
We recommend that you get in touch with a mortgage broker, to ensure you submit the correct documents to lenders. Errors in your mortgage application can really slow things down, but an advisor can help minimise these risks.
Be sure that any lender you speak to is authorised and regulated by the financial conduct authority, for your own protection. Sometimes, buy to let mortgages wont be regulated in this way.
Why is getting a mortgage on a fixed term contract so hard?
Essentially, lenders will only let you get a mortgage with them if they are convinced that you can afford all your repayments. This means paying back the mortgage on your home, plus interest, on time every month.
People trying to get a mortgage on a fixed term contract are off putting to lenders, because your income is seen as unstable and unreliable.
We understand that the difficulties in trying to get a mortgage as a temporary worker are frustrating. However, if you do fail to make repayments your home may be repossessed.
The restrictions are for your own good, really. Remember, those with bad credit or other traits viewed as ‘risky’ by the lenders find it harder to get a mortgage, too.
"When it comes to temporary employment contracts, lenders may be sceptical as to whether you can afford your repayments long term. This makes people on such employment contracts more risky mortgage customers."
What can I do to boost my chances of getting a mortgage while on a fixed term contract?
Firstly, realise that different lenders will have different opinions when it comes to fixed term contract employees. If you seek professional advice, you can find out what lenders are more likely to accept your request, given your employment type.
Secondly, if you have been in your job role for a long time, give proof of this to the lender. This can help convince them that despite being a fixed term contract, you are unlikely to find yourself out of work.
Thirdly, try to avoid any ‘bad credit’. Mortgage lenders consider a whole range of different factors when deciding to give you a mortgage or not. So, those on fixed term contracts should try to make everything else in their application as desirable as possible.
Fourthly, if you are a first time buyer find out if you qualify for financial support.
How can I better my credit score?
If you are on a fixed term contract your request is deemed to be riskier by lenders. So, you need to ensure all other aspects of your application are impressive, if you want to have your inquiry accepted.
A good or outstanding credit score can really help with this. This is because credit scores are one major thing that lenders consider when making their decision.
To get a high credit score make sure you pay your bills by their deadline. Try not to apply for credit in the run up to you applying. Applicants with a recent history of applying for credit weaken their chances of acceptance.
Are certain types of temporary workers more likely to be accepted?
The nature of work a mortgage applicant undertakes does affect their likelihood of being accepted, yes.
If your job role is in high-demand, you are more likely to be granted your mortgage! This is because in the event you lost your job, it should be fairly easy for you to find new employment. This means you are less likely to have trouble making your repayments.
If you are a worker on a long term type of temporary contract, you are also more likely to be approved. Those on a short term contract will have to ‘hunt’ for a job more frequently. This increases their risk of being unemployed, and in turn of them missing mortgage payments.
For new starters, many contracts have a probationary period. However, this means your employment is easier to terminate. So, you are less likely to be accepted when in the probationary period of contracts.
Finally, the fewer gaps you have in your employment history the better. The lenders need to be convinced that when your current term ends your contract is likely to be renewed.
Are there differences in the amount temporary workers can borrow?
The amount you could be allowed to borrow depends on your personal circumstances. You can likely borrow more if you have a positive employment history and a long term temporary contract.
You could also be lent more if you do not have gaps in your employment history.
With the right personal circumstances, you could potentially borrow up to five times your income. The deposit can be as little as 5%- in other words you could be offered a Loan To Value (ltv) of 95%.
Remember, though, if your circumstances are less desirable you may need to put forward a larger deposit. This is to make you seem like less of a danger to the lender. A mortgage advisor can help you figure out what you could borrow, and what deposit you might need to give.
Will variable pay be considered?
A lot of people on fixed term contracts have variable pay. For some self-employed individuals, these forms of income can be quite substantial.
Some providers will consider income in the form of overtime, commission, and even a bonus. However, you will have to prove that you have received this consistently on your current contract.
Also, most lenders will only include a certain percentage of this variable income in your overall income estimate. So, what they deem you to be able to afford might be less than if this variable income was fixed and regular.
What evidence need to be provided of my variable pay?
If you want the lending company to consider your variable income sources you will need to give some proof of its value and consistency.
So, they will probably want to see payslips that provide proof of this. A letter from your boss or employer might be required too.
If I have a fixed term employment contract what extra criteria do I need to meet?
You will need to get in touch to find out the exact extra requirements a lender has. Generally, though, they will be as follows:
- A good track record on your fixed term contract (e.g. 12-24 months)
- A history of having your contract renewed, normally a minimum of once
- A history of working jobs in the same industry
- A certain length of time left before your current contract ends
What else might the lender consider when reviewing my mortgage request?
Overall, a lender is looking to assess your affordability. This is true regardless of your employment type.
Firstly, the lender will look at your regular outgoings. They will compare this with your income. These two things enable them to work out if you can realistically afford the mortgage you have asked for.
Secondly, they will compare what they think you can afford with what amount you have requested to borrow. Lenders will also consider the interest rate and mortgage term you have requested, as well as the proposed deposit.
Finally, they will check the legitimacy of your identity. They will also follow up on your proof of address. Any errors here might lead to rejection. This is why your application needs to be checked over by a mortgage broker.
Where can I get mortgage advice as a self employed or temporary worker?
You can find the details of advisors online. Always make sure they are authorised and regulated by the financial conduct authority (FCA). If not, you could end up being scammed. For example, some buy to let plans will not be authorised by the FCA.
Frequently Asked Questions
What is meant by a fixed term contract?
A fixed term contract is a way of describing certain types of employment. If your current employment contract is due to end after a certain period of time, or after a specific piece of work is complete, you are likely on a fixed term contract.
Does being on a temporary contract affect mortgage?
Temporary work contracts can make it harder to receive mortgage lending. Fixed term contracts might limit your choice of lenders and mortgage conditions, such as interest rates and deposits.
Why is getting a mortgage on a fixed term contract so hard?
Essentially, lenders will only let you get a mortgage with them if they are convinced that you can afford all your repayments. This means paying back the mortgage on your home, plus interest, on time every month.
What evidence need to be provided of my variable pay?
If you want the lending company to consider your variable income sources you will need to give some proof of its value and consistency. So, they will probably want to see payslips that provide proof of this. A letter from your boss or employer might be required too.
