Fixed Term Contract Mortgage: What You Need To Know
The definitive guide to getting a Fixed Term Contract Mortgage.
Can you still get a mortgage with a fixed term contract?
Many temporary and seasonal workers assume they need a regular job to land a mortgage contract.
While this pathway presents extra challenges, some mortgage lenders cater to temporary workers. Let’s explore the strategies that will help you land a mortgage plan on a fixed term contract.
Can I get a fixed term Contract Mortgage?
The good news is you may still be eligible for a variety of mortgages. The hard part is simply proving its affordability. We strongly recommend using a mortgage advisor. Your financial advisor can help you succeed in applying for a mortgage.
It is important to seek advice so that your mortgage loan application is accepted the first time. Not only does this make home purchases faster, but every time customers apply for a home mortgage it will show up on the credit check. Hence, clients applying for a mortgage must seek financial advice to be accepted for the first time; otherwise, poor credit can make it difficult to accept a second time.
What is a fixed-term contract mortgage?
A Fixed term contract mortgage is specifically for people that need a mortgage on a fixed term contract. Whilst there is no particular mortgage product for this, there are certainly lenders and criteria that are more beneficial.
You may only be on a fixed term contract for a short while like a year, and then your employer may move you to a permanent contract. This is common with Doctors or Teachers for example, who initially may go on a Fixed term contract and then change to a permanent position when you are qualified.
However, some people work on fixed term contracts on a more long term basis. This temporary contract may make making a mortgage application difficult. Generally which mortgage lenders you can use depends on how many months you have remaining on your contract.
Review Mortgage Lenders
Not every lender hands out loans to seasonal workers. Before applying, check each lender’s history and see if they cater to workers on a fixed term contract.
Not conducting your research risks submitting an application that a lender will never approve. A mortgage advisor can help with research and finding a suitable mortgage lender.
Demonstrate Your Work History
Mortgage lenders heavily consider an applicant’s income history when making decisions. If multiple employers each gave you a fixed term contract, let lenders know.
This history will demonstrate your ability to land new work and earn consistent income.
A temporary worker with six or more months left on their fixed term contract has a greater chance of approval. You can also boost your chances by making money with side hustles. Your work history must demonstrate your ability to earn enough money to afford the mortgage.
Breaks in employment will create obstacles. Some mortgage lenders will not consider your application if you’ve had an employment gap in the last 12 months.
Even with a gap, it is not impossible to land a mortgage contract. Prioritizing lenders with minimal requirements will help. You can also reach out to a mortgage advisor to find the right lender for you.
The Down Payment
A lender is only on the hook for the difference between your down payment and the purchase price. Increasing your down payment decreases the mortgage lender’s risk.
Lowering the lender’s risks will increase your likelihood of getting approved for a mortgage contract.
Fixed term contract workers can compensate via a higher down payment. You can increase your down payment percentage by investing additional funds or buying a smaller home.
Not only does a higher down payment help your application, but you’ll also receive lower interest rates. Lower interest rates can save you thousands of dollars through the lifetime of your mortgage.
Many home buyers aim for a 20% down payment. This down payment protects them from private mortgage insurance premiums.
Even if you cannot afford a 20% down payment, do not give up. Some mortgage lenders will make accommodations even if you have a fixed term contract.
How long do you need left on a fixed term contract to get a mortgage?
This will vary depending on the lender you want to use. Some may want 6 months left for example, or even potentially as little as 3 months left.
Some lenders may even require you to have had your contract extended once before they will consider you for a fixed term contract mortgage.
Do you need to have already had a contract extension to get a mortgage?
This will depend on both the lender, and your occupation. Sometimes being in certain job roles will mean you do not have to have had your contract extended.
Likewise, some lenders don’t require you to have had an extension at all. This is why it is important to speak to a specialist mortgage broker to get a better understanding of your position.
Can you get a fixed term contract mortgage before the job starts?
You can get a fixed term contract mortgage before the job has even started with some lenders. This can be extremely beneficial if you have a job lined up in the next few months and want to use that income for your mortgage.
Are interest rates higher for people on a fixed term contract?
Interest rates should not be affected by the fact that you want a fixed term contract mortgage. The products used tend to be the same as if you were in a permanent position.
However, certain lenders will have more beneficial criteria which is why getting the right lender for your situation is really important.
Can a first-time buyer get a fixed term contract mortgage?
A First Time buyer can certainly get a fixed term contract mortgage in the same way that a home mover would.
However, if you are a first time buyer you may find you have less deposit than a home mover. This could potentially limit your options slightly.
Applying for a Fixed Term Contract Mortgage
If you have a fixed-term or fixed-term contract, obtaining a mortgage may not be easy. The term is limited. Don’t worry, some specialized lenders offer pretty competitive rates.
A single-term contract gives lenders an idea of the length and income of your contract. Even if you only have a one-year contract, specialty lenders can still say yes.
If you are a new contractor it will likely take at least six months of track record with a portfolio of future jobs. Renewing old contracts also shows lenders that your income and employment are viable on a mortgage.
How Much Can You Borrow?
Lenders establish a set of guidelines to determine how much each buyer can borrow. These guidelines will help you set the right expectations for your mortgage.
Most lenders take your annual income and multiply it by a number between three and five. If you earn £ 50,000 per year, you can expect a loan amount ranging from £ 150,000 to £ 300,000.
Your mortgage amount depends on the lender’s preferred multiple.
Raising your annual income through side hustles will increase your mortgage amount. Side hustles can cover work gaps and assist with monthly mortgage payments.
Want Help Landing Your Mortgage?
Mortgage applications help lenders assess the risk of each home buyer. While they remove stress from the lender, applications add stress to home buyers. We can take the pressure off your shoulders and help you land a mortgage.
Albion Forest helps fixed term contract workers secure mortgages for their new homes. Get in touch with our mortgage advisors to see how we can help.