Fixed Term Contract mortgage Solutions
The definitive guide to getting a Fixed Term Contract Mortgage.
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Can you get a mortgage on a fixed term contract?
You may find it more difficult to get a mortgage while on a fixed term contract. This is due to lenders being uncertain about the longevity of your employment. However, depending on your situation you may find that you have some options.
Why is it more difficult?
When applying for a fixed term contract mortgage you may struggle because the lender will be unsure of what you will do after the contract ends. This therefore means that some lenders will require a history of contracts in order to lend to you. However, others may allow you on a fixed term contract mortgage as long as you have a certain amount of time remaining on the current contract.
What documents will I need for a Fixed Term Contract Mortgage?
You will need various documents, many of these will be the same as a standard mortgage. However, you may be required to provide more details around your contract, for example the contract itself, prior contracts or a reference from your employer. In general you can expect to be asked for:
- Bank statements
- Proof of ID
- Your contract
- Your previous contract if possible
- Employers reference (This will generally be sought after application, directly with your employer)
How much can you borrow?
In general most people can expect to be able to borrow up to 4.75 times their household income. However, in some circumstances people can borrow up to 6 times their income.
For more information on how much you can borrow you can use our mortgage calculator. The income you can enter into the calculator can be:
- Employed income
- Self employed income
- Benefit income
- Maintenance income
- Investment income
- Pension income
- Possibly other money that comes into your home.
Which lenders will accept fixed-term contracts?
Most lenders will accept a fixed term contract for a mortgage. However, some may require more evidence than others. This can lead to some being a better option for a fixed term contract mortgage.
We highly recommend seeking advice from a fixed term contract mortgage specialist advisor to find out which lender is the best fit for your personal situation.
What types of fixed term contract mortgage can I get?
When it comes to different types of mortgages there are many products available. However, they generally come down to 2 different types.
Fixed rate mortgages
Fixed rate mortgages are the most common type of residential mortgage. They have a fixed rate of interest over a set initial period, usually 2, 3 or 5 years.
This type of mortgage usually have an early repayment charge if you try to get out of them before the product end date.
Variable rate mortgages
Variable rate mortgages will vary depending on either the lenders standard variable rate or the Bank of England base rate.
Unlike fixed rates, these often do not have an early repayment charge. However, they do sometimes so be careful when considering a product.
How much can I borrow on a fixed term contract?
When borrowing on a fixed term contract you can sometimes borrow a higher amount. This will depend on how you are paid. If you are paid weekly you may be able to borrow more than people paid monthly.
The maximum you may be able to borrow is up to 6 times your income, however, more often it is a lower multiple or 4.5-5.5 times your annual household income.
Will having a guarantor help me get a mortgage on a fixed term contract?
Most lenders do not accept guarantors. It is more common to see a Joint Borrower sole proprietor mortgage. These let you add people onto the mortgage to increase the amount you can borrow, but they do not get ownership of the property.
This can be useful if you cannot borrow enough due to your fixed term contract. If you are considering this option we recommend speaking to your advisor as they can be quite complex.
How long do you need left on a fixed term contract to get a mortgage?
Like most criteria, the amount of time required left on a fixed term contract will vary depending on the lender. However, some lenders will consider a fixed term contract with as little as 3 months remaining. Alternatively if you have another contract lined up for when your current one ends, you may be able to use that straight away.
This can come in handy if it is a higher paid contract that you will be going on to.
Can I remortgage on a fixed term work contract?
If you are already a homeowner, you should still have options to remortgage to a fixed term contract mortgage. The normal criteria will apply for fixed term contracts.
Your other option is a product transfer, this allows you to stay with your current lender but on a new product.
Can you get a mortgage on a 12 month contract?
If you are on a 12 month contract you should still be able to get a mortgage. Usually this will depend on how far through the contract you are.
Some lenders may also make exceptions to their contract criteria for professionals.
Can a first time buyer get a fixed term contract mortgage?
A first time buyer should be able to get a mortgage in the same way as a home mover. Therefore if you are a first time buyer the normal criteria for a fixed term contract mortgage will apply and as long as you have 3-6 months left on your contract you should have options.
Will gaps in my work history be an issue?
It will depend on the length of the gap in your work history as to whether a lender will accept it. Most lenders allow a small break of maybe a month or two between contracts, longer than that and you would need to have a good explanation for why you were out of work.
Sometimes it will also depend on the length of experience you have in your industry, for example if you have more than 2 years experience in your current industry, they may ignore a gap in your work history.
Do you need to have already had a contract extension to get a mortgage?
You do not need to have had a contract extension in order to get a fixed term contract mortgage. However, some lenders have stricter criteria and may want to see a longer history, and possibly an extension. This is another reason why seeking advice as a fixed term contractor is important.
Are interest rates higher for people on a fixed term contract?
Generally interest rates will be the same for people on a fixed term contract. You may be able to get lower interest rates potentially if you are a professional, which is more to do with your career choice rather than contract type.
However, as a general rule a fixed term contractor will not pay a higher interest rate unless they need to go to a more expensive lender in order to secure their mortgage for other reasons.
How much deposit do I need for a fixed term contract mortgage?
If you are trying to secure a fixed term contract mortgage you will need a minimum of 5% deposit on both standard purchases, and new build properties.
There are many factors that may affect how much deposit you need, such as credit history, and maximum loan amounts. Therefore you should factor these other things in when working out your deposit required.
Can I get a fixed term contract mortgage for a professional?
Professionals often have their own criteria when it comes to a fixed term contract. Often lenders will make an exception to their requirements. This is because professionals often get multiple fixed term contracts in a row, especially in the early years of their career.
Professionals for mortgage purposes would probably include:
Got a question we haven’t answered? Get in touch and we’ll answer it and likely add it to this article to help others!
A mortgage article by Mark Robinson – Mortgage & Equity Release Broker