Last reviewed on 6th October 2023 by Martin Alexander (Mortgage Advisor)
Zero-hour contracts have been on an upward trend for several years. There are over one million workers in the UK who are employed on zero-hour contracts. But what does it mean if you need a mortgage on a zero-hour contract?
Well, lenders have adapted to employment trends, so getting a mortgage on a zero-hour contract is possible. Actually, it’s now easier than ever to get a mortgage without a full-time contract. This doesn’t mean you should rush into applying for a mortgage. Mortgage approval is far from simple, but with the right approach, a mortgage is possible.
What is a zero-hour contract mortgage?
There isn’t a specific zero-hour contract mortgage. In fact, there is no difference between this and a regular mortgage. However, the term is used by lenders to refer to the criteria surrounding applicants who are employed on zero-hour contracts. This is because permanently employed workers and zero-hour contract workers have entirely different criteria.
Applicants are assessed differently because those on zero hours 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.
Can I get a mortgage on a zero-hour contract?
Yes, a mortgage is possible whether you’re employed full-time, part-time or on a zero-hour contract. That said, lenders tend to be more strict when assessing applicants who don’t have full-time permanent employment.
Being on a zero-hour contract can leave you uncertain about how much you will earn in any given month. Lenders also share this level of uncertainty as your income could change. But there is some good news.
Plenty of lenders understand that not every employer offers full-time contracts. Furthermore, working on a zero-hour contract may offer you 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 lenders have adapted to changes in employment trends and have separate criteria for borrowers on zero-hour contracts.
How to get a mortgage on a zero-hour contract
The key ingredient in getting any mortgage is showing lenders 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 your employment structure.
So, how can you get a mortgage when you’re on a zero-hour contract?
- Find a mortgage lender that accepts zero-hour workers
- Provide evidence of your employment history
- Use your current role and occupation to your advantage
- Showcase the consistency of your income
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.
Provide evidence of your employment history
Your employment history is a crucial piece of information, and it’s often where lenders start. For instance, if you’ve worked in the same sector for many years or even with the same employer, it can show lenders that your income 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. In comparison, other lenders may agree to a mortgage even if you’ve just started a new job.
The role you have and your occupation
Your occupation and role can be a huge factor when applying for a mortgage. This is especially true if your role requires a certain skill or qualification because it often takes time and dedication to achieve.
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, making you much less likely to switch jobs.
Some lenders may even offer you favourable rates if you work in a particular profession, regardless of your contractual status. Occupations such as teaching, accounting, engineering, doctors and medical professionals are some 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 several years, which can also help your mortgage application.
Showcasing your earnings
Lenders also need to be confident that you can 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 correctly is a must. What this means is that 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.
Will I need a large deposit as I’m on a zero-hour contract?
Although getting a mortgage with a 5% deposit is possible, 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 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. Knowing the amount of deposit you’d require is impossible without understanding your circumstances.
Which mortgage lenders accept zero-hour workers?
Lenders that accept zero-hour workers include:
- Skipton – Will accept applicants who have been in the same profession for two years, along with a copy of your current contract and the last three months’ payslips.
- Barclays – Consider zero-hour applicants with clear evidence that the income is sustainable.
- Mansfield – If less than 80% LTV, applicants must provide evidence of a 24-month track record. If more than 80% LTV, you’ll need evidence of a 36-month track record.
- Norton – Will accept borrowers with two years of continuous employment without gaps.
- Darlington – Requires income evidence of up to 1 year.
As you can see, the differences between lenders and what they require can be quite staggering. You must approach the right lender from the start. Furthermore, this is just a snapshot of the lenders we work with. There are over 100 lenders that you could potentially apply with.
Applying with an unsuitable lender could waste time, money and possibly the home you want to purchase. Each lender has its criteria, and how they assess applicants is entirely different.
The best lender for you will also depend on the type of mortgage you need. For instance, a residential mortgage is entirely different to a buy to let mortgage. Furthermore, you may need an adverse credit lender if you have credit issues.
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 than a residential mortgage. This is because purchasing a buy to let should provide 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.
Some lenders 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 said, lenders may require you to be a homeowner or have a 15-25% deposit.
It’s important to understand that other lenders require a certain income level. In addition, you may only qualify if you’ve been with the same employer for over a year. For instance, Natwest requires applicants to be with the same employer for at least 12 months. In comparison, Metro Bank won’t consider zero-hour workers for buy to let mortgages, irrespective of how long you’ve been employed.
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 may charge higher mortgage fees.
What to do next
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, you’ll likely be declined, given the circumstances. This is because the number of lenders that will consider you for a mortgage will be limited.
Pinpointing a suitable lender out of the hundreds available is very difficult. That’s why using a broker can be so important as we’ll do this on your behalf. In my experience, even those on full-time contracts can find it challenging to find a suitable lender without the help of an advisor.
Finding the right lender is only part of getting a great mortgage. Preparing your application to ensure you’re offered a competitive rate is 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.
About the author
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.