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Mortgage on a zero-hour contract


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HomeMortgage Help GuidesMortgage on a zero-hour contract

Mortgage on a zero-hour contract

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Last reviewed on 15th February 2022

Zero-hour contracts have been on an upward trend for a number of years. There are almost two million workers in the UK that are employed on zero-hour contracts. But, what does it mean if you need a mortgage on a zero-hour contract?

The majority of lenders will require you to be in full-time work so this can make getting a mortgage on a zero-hour contract difficult. This is because zero-hour contracts can give lenders the impression that you don’t have a steady income stream.

Don’t panic. There are lenders that specialise in this field, so it may well be possible for you to get a mortgage on a zero-hour contract. Lenders have also spotted the upward trend in employment and that’s why a select few offer mortgages for those on zero-hour contracts. As a result, it’s perhaps now easier than ever before to get a mortgage without a full-time contract.

This doesn’t mean to say you should rush into applying for a mortgage. Mortgage approval is far from simple, but with the right approach, there’s a possibility of getting approved.

This guide will explain everything you need to know about applying for a mortgage on a zero-hour contract. You can also make an enquiry or ask our advisors for anything you’re unsure about.

What is a zero-hour contract mortgage?

A zero-hour contract mortgage is a home loan specifically for those who don’t have a full-time contract of employment but do have a zero-hour contract.

The reason zero-hour contract mortgages are different from regular mortgages is that borrowers will typically have no guaranteed work. Furthermore, available working hours aren’t usually guaranteed either. As a result, lenders can be left with little incentive to lend. This is why you may struggle to get a mortgage, especially with a mainstream lender.

Being on a zero-hour contract can leave you with uncertainty surrounding how much you’re going to earn in any given month. Lenders also share this level of uncertainty as your income is likely to fluctuate. But, there is some good news.

Some lenders recognise that some employers don’t offer full-time contracts. Furthermore, working on a zero-hour contract may offer you the flexibility that you wouldn’t otherwise have. Being on a zero-hour contract also doesn’t suggest that you’re earning any less than someone who has a full-time contract. That’s why some lenders have adapted to changes in employment trends and offer mortgages for those on zero-hour contracts.

How to get a mortgage when you’re on a zero-hour contract

The key ingredient in getting any mortgage is to show lenders that you’re not a high-risk borrower. This is because lenders want the mortgage to be repaid (obviously!). Due to you not having a full-time contract, the odds are stacked against you from the start. You’d be viewed as high-risk simply because of the way your employment is structured.

So, how can you get a mortgage when you’re on a zero-hour contract?

Lenders will want to dive into the details of your contract. Although your contract may be zero-hours, there’s often a lot more that lenders can use to base their assessment on.

Using your employment history

Your employment history can be a crucial piece of information and it’s often where lenders start. For instance, if you’ve been working in the same sector for a number of years or even with the same employer, it can show lenders that your employment is secure.

In comparison, if there are large gaps in your employment or you’ve just started a new job, it can be a cause for concern. This can also happen if your employment is scattered around different types of industries. Some lenders will also require you to be with the same employer for the last 12 months. Whereas other lenders may agree even if you’ve just started a new job.

The role you have and your occupation

Your occupation and the role you have can be a huge factor when applying for a mortgage. This is especially true if your role requires a certain skill or qualification because they often take time and dedication to achieve. As a result, it’s more likely that you’ll be able to find work in a skilled occupation so repaying your mortgage shouldn’t be a problem. Furthermore, it shows lenders that you made a conscious decision to enter a profession so you’re much less likely to switch to something else.

Some lenders may even offer you favourable rates if you’re qualified in a certain profession, irrespective of your contractual status. Occupations such as teaching, accounting, engineering, doctors and medical professionals are just some of the careers where lenders may offer flexibility towards mortgage approval.

That being said, your role isn’t limited to a certain profession. You may still be able to show lenders that you’ve been in a specific field for a number of years which can also help your mortgage application.

Showcasing your earnings

Lenders also need to be confident that you’re able to afford the mortgage you’ve applied for. Just because you work on a zero-hour contract, it doesn’t mean you’re not earning a respectable income. More importantly, showing savings in the bank each month can work wonders for your application.

This doesn’t mean to say you’d simply present your bank statements to a lender and get approved. Making sure you ‘package’ your application properly is a must. What this means is, you must showcase your true financial potential. Our advisors can do this on your behalf.

A strong application can be granted maximum amounts from a lender and you may even qualify for a headline deal. On the other hand, if your application isn’t presented well, you may be offered a lot less or even declined.

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Will I need a large deposit as I’m on a zero-hour contract?

Although it’s possible to get a mortgage with a 5% deposit, larger deposits can work in your favour. Larger deposits often mean there’s less risk for lenders. As you’ll already be considered high-risk due to working on a zero-hour contract, it’s a good way to reduce risk around your application.

Some lenders may require you to have a deposit of 10-15%. Don’t let this put you off. It’s possible to qualify for competitive rates with a small deposit. It simply depends on the lender you’re applying with.

To get an accurate deposit amount, you’d need to speak to our advisors who can then look at your situation in more detail. Without understanding your circumstances, it’s impossible to know the amount of deposit you’d require.

Zero-hour contract mortgage lenders

While there are lenders that offer tailored mortgages for zero-hour contract workers, you may also qualify for a regular mortgage with a mainstream lender.

It’s possible to access the same deals that a full-time contracted worker would have. Each lender has its own criteria and the way they assess applicants can be completely different. For instance, some lenders will require you to have 18 months of consecutive payslips, whereas other lenders only require 3 months of payslips.

As you can see, the differences between lenders and what they require can be quite staggering. It’s crucial that you approach the right lender from the start. Applying with an unsuitable lender could result in you wasting a lot of time, losing money and possibly the home you want to purchase.

The lender that’s best for you will also depend on the type of mortgage you need. For instance, a residential mortgage is completely different to a buy to let mortgage. Furthermore, if you have credit issues, you may need an adverse credit lender.

Buy to let mortgage lenders for zero-hour workers

It’s sometimes easier to get a buy to let mortgage on a zero-hour contract in comparison to a residential mortgage. This is because purchasing a buy to let should provide you with an additional income. As a result, if there is a shortfall, the potential income from your buy to let could provide your application with a boost.

There are lenders that don’t have any income requirements for buy to let mortgages. This can be great for when you’re on a zero-hour contract. That being said, lenders may require you to already be a homeowner or have a 15-25% deposit.

It’s important to understand that other lenders do require a certain level of income. In addition, you may only qualify if you’ve been with the same employer for over a year.

Adverse credit lenders for zero-hour applicants

If your credit file isn’t in great shape then your chances of mortgage approval will be slim, but not impossible. Although there are specialist lenders, mortgage approval will largely depend on the credit issues you’ve faced. Together with a zero-hour contract, you are facing an uphill battle.

A good place to start is to download your credit reports. This will give you a good idea of your credit position before applying for a mortgage. Some lenders refuse certain types of adverse credit altogether, irrespective of your employment type.

There are specialist lenders for when things get really tough. The rates on offer may not be as competitive as regular mortgages. This is because lenders need to minimise their risk and therefore may charge higher mortgage fees.

Specialist advisors for workers on zero-hour contracts

If you’re on a zero-hour contract, you’ll almost certainly require the help of an advisor. If you do approach a lender by yourself, it’s likely that you’ll be declined given the circumstances. This is because the number of lenders that will consider you for a mortgage will be limited.

Trying to pinpoint a suitable lender out of the hundreds available is near enough impossible. That’s why using a broker can be so important as we’ll do this on your behalf.

Finding the right lender is only part of getting a great mortgage. Preparing your application to ensure you’re offered a competitive rate is also vital in keeping your financial affairs in order. It’s simply not viable to get a mortgage at an extortionate rate when other lenders are willing to offer you much better deals.

You can make an enquiry below and an advisor will call you straight back.


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About the author

Mortgage Advisor | More Articles

Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.