Umbrella company employee mortgages

Both umbrella contractors and limited company contractors struggle to get mortgages the conventional way. And, for both, it’s evidencing income that’s the problem. But that’s where many of the similarities end.

This page is about the barriers to mortgage acceptance umbrella contractors face. If you’re a limited company (PSC) contractor, you should visit: Limited Company contractor mortgages

How do I classify myself?

One of the biggest differences across our industry is how external parties interpret our roles. There’s no one clear definition of ‘self-employed’. Then, as you break that down (freelancer, contractor, independent professional), it can muddy the waters further.

Imagine, then, the confusion now that umbrella companies have begun to call their contractors ’employees’.

Contractor or employee?

True! You have payslips like a PAYE employee. You (probably) only work for one company over the course of your contract. And you may well spend every day shoulder to shoulder with that company’s full-time employees.

But, in other ways, you’re very much a contractor. Your payslip is markedly different, with many more fees and deductions compared to a regular PAYE payslip. Your contracts are typically only six months long. And, despite your high day rate, your ‘take home’ really doesn’t reflect that.

You can see why untrained advisors struggle to nail down your income. You can perhaps also imagine them thinking, “Why on earth would you work this way?”.

The simplest solution is not to change how you work, or bang your head against the wall. It’s not you that’s the problem. It’s the limited scope of in-branch advisors and call centre agents that’s letting you down. There is another way.

A mortgage broker who gets umbrella contracts and can interpret them for lenders!

The other factor that umbrella and limited company contractors share is that they both work to day rates. And it’s this factor that the specialist underwriters we work with value.

Through us, the umbrella employee/contractor affordability equation works like this:

• day rate x 5 (days/week) x 46 (weeks/year) = annualised figure for salary equivalent

Then, the underwriter will factor in their affordability multiplier. It’s usually x5 for umbrella contractors, but that can change depending on other factors, e.g.:

• length of time working in your current industry
• the actual industry in which you work
• credit history, etc.

Umbrella contractor/employee affordability example

So, imagine you’re an umbrella contractor who:

• earns £250/day,
• works 46 weeks/year
• has worked in your current industry for some time, and
• has an excellent credit rating. 

Your affordability calculation could look like this:

• weekly rate = [£250 (day rate) x 5] = £1,250
• annual rate = [£1,250 (weekly rate) x 46] = £57,500
• potential borrowing = [£57,500 (annualised day rate) x 5 (affordability multiplier) = £287,500

Feel free to use our calculator using your day rate as the base figure. Then, if you can work with your borrowing potential, give us a call. We can walk you through the next steps, and you need never have to deal with High Street barriers again.