Our Guide to Temporary Agency Income Zero Hour Contract Mortgages
Over the past five years, the number of workers on zero hours contracts has tripled, said a report by the website iNews on the 14th of September 2018, rising from 19252,000 jobs to 901,000 and accounting for more than a quarter of the growth in employment.19
In a story on the 23rd of April the same year, the Guardian newspaper put the number even higher, with a total of 1.8 million zero hours contracts – 100,000 of which were added in the last 12 months alone.
A zero hours contract means that you are paid only for the hours you actually work but have no guaranteed minimum number of hours in the job at any given time. The opportunity for working – and earning your livelihood – is therefore highly irregular and uncertain.
That makes getting a mortgage fraught with difficulties, since lenders are going to be looking for evidence of a stable, regular and reliable income.
The silver lining to that particular cloud is that not all mortgage lenders are the same and there are some who are prepared to consider your application even if your employment is by way of a zero hours contract. Here at Needing Advice, we may help you identify those lenders and put you on the road to securing a zero hours contract mortgage.
Why is it difficult to get temporary agency income zero hour contract mortgages?
If you are working a zero hours contract, you are likely to be looked upon less favourably than someone with regular hours when it comes to applying for a mortgage. Since you have no guaranteed income, you are typically considered a higher risk, with a greater likelihood of missing your mortgage repayments in the future.
You are likely to be asked to provide evidence of your regular income to show that you are going to be able to afford the repayments.
If you are working a zero hours contract, however, evidence of that guaranteed income is going to be difficult to furnish since both the hours you work and therefore the income you receive is going to fluctuate and dry up altogether once the contract finishes and until you can renew it or find alternative employment. In a word, mortgage lenders will regard you as higher risk.
But not all lenders are the same and some have different attitudes to others. Some might regard certain types of temporary contract more favourably than others. Many IT professionals and even doctors, for example, work zero hours contracts, with no guarantee of regular hours. Instead, they work when needed. Even though this may result in periods of sporadic employment, they retain a profession in which they are able to work on a more or less continuous basis.
This contrasts with someone who might be working a zero hours contract for a retailer who needs extra staff to cover a busy festive season, for example – and in that case, your chances of obtaining a mortgage are much slimmer because your employment is likely to last only a few weeks or months.
Once again, however, it is worth bearing in mind that all mortgage lenders are different, and all are going to treat applications on a case by case basis, taking into account a whole host of factors, including the type and nature of employment you have.
If you work as a contractor, for example, you might have the benefit of formal contracts showing how much you are going to be earning and for how long. In that case, evidence of those contracts may take the place of supplying several years’ worth of audited accounts in support of your mortgage application.
Instead, some lenders may assess your mortgage affordability on multiples of your annualised contract rate – which might support a successful mortgage application as soon as your contract starts.
How can I improve my chances of getting a mortgage while on a temporary contract?
A variety of steps may improve your chances of getting temporary agency income zero hour contract mortgages. As you might imagine, these depend on your submitting the supporting documentary evidence of an appropriate level of income that is unlikely to come to an abrupt or sudden halt. In other words, be prepared to submit:
- all your payslips for the past year;
- two P60 forms or tax returns;
- evidence of your having done similar temporary work for at least the past 12 months – and preferably longer; and
- bank statements covering the past three years.
In addition, check your credit history and consider ways of improving your score – the official Money Advice Service suggests a number of ways you might do so.
How much deposit do I need for a zero hours’ contract mortgage?
The bigger your deposit, the less you need to borrow, the less risk any mortgage lender needs to take on and the greater the chances of your application being accepted, therefore, for a temp agency income mortgage.
Although it is possible to obtain a zero hours contract mortgage with a deposit as small as 5%, for example, lenders are going to take many other factors into account – including your credit rating. If you have a poor credit history, you might need a deposit of at least 15% of the purchase price of the home you want to buy – and possibly more, depending on just how poor your credit history is and how recent were some of the issues.
Next steps – Our guide to temporary agency income zero hour contract mortgages
If you are working a zero hours contract, securing a mortgage is likely to prove more difficult than for someone in permanent work, with a guaranteed regular income.
Nevertheless, there are specialist lenders prepared to advance temporary agency income zero hour contract mortgages – and here at Needing Advice, we may identify them for you and help you secure the funding you need for that purchase of your new home.