Contractor and day-rate mortgage
A contractor mortgage lets you borrow based on your day rate rather than company accounts. Contractor-friendly lenders annualise the rate (day rate times days per week times weeks per year, often 46 to 48) to set your income. That usually gives a much higher, fairer figure than being assessed as self-employed on net profit or as a director on dividends. You normally need a current contract and a short track record in the same field.
Why the day-rate method exists
A contractor working through a limited company often pays themselves a low salary and modest dividends, leaving profit in the company. Assessed as a director on salary plus dividends, they look low-income. Assessed as a sole trader on net profit, the same. But their actual earning power is the day rate. Contractor lenders cut through this by annualising the rate directly, which is usually the most generous and the most accurate reading.
A worked example
A £400 day rate, five days a week, at 48 weeks a year, is assessed as about £96,000 of income, even if the accounts or tax return show far less because profit was retained or the year was part-complete. The lender lends against the £96,000. The same applicant on a dividends basis might be offered a fraction of that.
How lenders commonly annualise a day rate
There is no single formula. Lenders take different approaches to turning a day rate into an annual income, and the difference can move how much you can borrow. The table below shows the approaches lenders commonly take. These are indicative patterns across the market, not any single lender's policy, and the numbers are worked examples on a £400 day rate at five days a week.
| Approach lenders commonly take | How the annual income is set | Example (£400 day rate) |
|---|---|---|
| Day rate x 5 days x 46 weeks | A more cautious weeks figure, allowing for holiday and gaps between contracts | about £92,000 |
| Day rate x 5 days x 48 weeks | A more generous weeks figure | about £96,000 |
| Limited-company contractor, on the day rate | The annualised day rate, not company accounts or dividends | Usually the most generous reading; needs a current contract |
| Umbrella company (PAYE), sometimes from day one | Assessed on umbrella payslips, treated close to an employee | Can suit a new contractor with little trading history |
| Contractor needing a track record first | Some lenders want a period of contracting (often around 12 months) before using the day rate | A short, explainable gap between contracts is usually fine |
Indicative approaches across the market, not a named lender's policy or a quote. The weeks multiplier, the trading history required and how umbrella income is read all vary by lender.
What lenders want to see
- A current contract stating your day rate, with some time still to run.
- A track record in the same field, commonly around 12 months.
- Recent bank statements showing the contract income arriving.
- A clean credit history and a normal deposit.
Umbrella company tax changes in 2026
Freshness note, last reviewed 1 July 2026. The rules in this area are changing. Treat this as general context and confirm the current position with a regulated broker or accountant before you rely on it.
The government has been reforming how umbrella company arrangements are taxed, with responsibility for operating PAYE moving up the supply chain to recruitment agencies, or to the end client where there is no agency, from April 2026. The aim is to reduce non-compliance in the umbrella market.
For a contractor applying for a mortgage, the practical points are these. Your payslips and the way your income is structured may change, so keep clear, recent evidence of what you actually earn. Lenders that assess umbrella workers close to employees may find the newer arrangements easier to read. And because the picture is still settling, the sensible move is to have your paperwork in order and let a broker match you to a lender comfortable with your exact setup. We introduce you to a regulated broker who can advise.
Common questions
How is a day rate turned into an income?
A common approach is to multiply your daily rate by the number of days you work in a typical week, then by a set number of weeks a year (often 46 to 48, to allow for holiday and gaps). So a £400 day rate at five days a week and 48 weeks is assessed as roughly £96,000. The exact multiplier varies by lender.
Do I need years of accounts as a contractor?
Often not. Contractor-friendly lenders assess you on the strength of your current contract and day rate rather than on company accounts or net profit, which usually understate a contractor's real earnings. Some will lend with only a short time left on the contract.
How long do I need to have been contracting?
Many lenders want to see a track record in the same line of work, commonly around 12 months, though some accept less if you moved straight from employment in the same field. A short, explainable gap between contracts is usually fine.
Does it matter if I contract through my own limited company?
No. Contractor assessment looks at the day rate, not how you are paid. That is often better than being assessed as a company director on salary plus dividends, which can badly understate a contractor's income.
Founder, MortgageExplained
Adam spent nearly a decade as a mortgage adviser at Just Mortgages, with further experience in commercial finance. He is CeMAP and CF qualified. He built MortgageExplained to do one thing well: explain mortgages in plain English, then introduce you to a regulated broker when you are ready. Every page is written and reviewed by Adam.
Last reviewed: 1 July 2026