Can you get a mortgage on a fixed-term contract?

Mortgages can be a difficult topic to get your head around, and trying to get a mortgage when you have an inconsistent employment situation can feel like a pretty big task. It’s best not to panic in these situations. Buying a house is a long process, and you’ve probably got time to figure it out.

We’ve outlined everything you need to know about getting a mortgage on a fixed-term contract below.

Can I get a mortgage on a fixed-term contract?

The short answer is yes, there is every chance that you can get a mortgage if you are on a fixed-term contract. The same goes for anyone with an inconsistent income, such as freelance or temporary workers. Getting a mortgage whilst on a fixed-term contract can have its challenges, but it shouldn’t put you off looking into your options. Whilst a mortgage application stacked with breaks in employment could cause you a problem, a trained mortgage broker may be able to find you a mortgage provider who is willing to give you a mortgage.

How to get a mortgage on a fixed-term contract

When a mortgage provider considers your application, they are essentially assessing the level of risk that you present and how likely it is you’ll payments will be on time or paid.. One way they do this is to look at how often you can guarantee you’ll get paid. The less consistent your income, the more risk you seem to present. There are, however, plenty of things you can do to come across as a more secure investment. Here are some things you can do to help your situation:

• Present a copy of your current employment contract - A mortgage provider can see how long your current employment and income will last, and how stable your current income is
• Provide evidence of past employment contracts - It can help to show that you have been able to consistently find employment in your field at a similar rate of income
• Demonstrate a reputation in your field - Providing reference letters and evidence of industry connections can show that you can find future employment with a similar income because you are sought after
• Keep your accounts up to date - It can be helpful to show that  you are financially capable and able to to keep on top of all your expenses despite having a potentially inconsistent income
• Prove your income - Showing a lender how much you are earning can demonstrate how capable you are to pay for your deposit and initial payments
• Improve your credit score - You could use an existing credit card and ensure that you make your payments in full each month to improve your credit score (it’s not a good idea to apply for new credit cards when you’re trying to get a mortgage) Check out ‘How to boost your credit score in 11 simple steps’ or ‘Does paying rent help boost your credit score’
• Secure a larger deposit - A large deposit can help a mortgage provider to feel more confident in your ability to pay off the loan
• Consider using a mortgage broker - Mortgage brokers can help find you the best options on the market and might use industry connections to find sympathetic mortgage providers

Things mortgage providers will look out for

Mortgage providers use all sorts of factors when they are considering the risk of a mortgage, and there are some that particularly make a difference if you’re on a fixed-term contract. These are the factors that a mortgage might look at more closely if you are on a fixed-term contract:

• How long you have been in your current role - A lot of mortgage providers will be looking for a minimum of 12 months in your current role or at least belonging to the same agency for 12 months. Some mortgage providers may have lower minimums, so it can be worth doing your research.
• How long your current contract will last - Most mortgage providers will be looking for you to have at least 3 to 12 months remaining on your contract, but the more regularly you have had contracts renewed in the past will help your case.
• How many breaks in employment you might have had and how long they lasted - Some mortgage providers see any gaps in employment in the last 12 months as a bit of a dealbreaker, but others will be ok for gaps that last between 1 and 4 weeks. Again, it’s worth doing some research into different mortgage providers’ rules.

How much can I borrow on a fixed-term contract?

The amount you can borrow can vary depending on the actual details of your employment, as well as plenty of other factors that affect your financial situation. Best case scenario, it’s possible that you could be offered all the same packages as someone on a conventional employment contract. You may just find yourself having to jump through a few more hoops than others to prove that you can actually continue to pay off your loan.

Can I remortgage on a fixed-term contract?

You should be able to remortgage on a fixed-term contract, you may just face having to jump through all the same hoops as you did the first time. Sticking with your existing mortgage provider can help because they will already have all the right information. However, you may not be able to negotiate any new conditions to your mortgage. Changing providers can potentially give you the option to make changes, but you may then face a whole new set of enquiries into your work situation and income. Both options have their pros and cons, it’s just a case of finding what works for you.

Can I change jobs after I get approved for a mortgage?

Changing jobs after you’ve been approved for a mortgage can make mortgage providers worry about your new situation. You might be on a probationary period, making your job position seem potentially at risk. Your income could also change, and that brings a level of financial instability that could worry mortgage providers.

You are required to let your mortgage provider know when your employment situation changes, so keeping it to yourself can get you in quite a bit of trouble. Provided that the job and income are similar to what you had before, and the contract is set to last for a decent amount of time (ideally 12 months), there is every chance you’ll be able to hold on to your existing contract. There is the possibility that the mortgage provider will want to look at the terms of your mortgage again, so it’s worth taking that into account before any job changes.

A few final tips…

Getting a mortgage on a fixed-term contract is absolutely a possibility, you just might have to put the work in to prove that your employment situation and income are stable. Here are a few last things you can do to help your situation:

• Do your research - Look into as many different mortgage providers as you can and their regulations on different income and employment situations to find one that works for you.
• Try not to apply to multiple lenders - Multiple applications will show up on your credit check and can have a very negative effect on your mortgage application. You might want to only apply to one, once you’ve done your researchConsider using a mortgage broker - Brokers know the industry well and will usually be able to explain your options in more depth. They might even know the perfect mortgage provider for your needs.