According to data from the Office for National Statistics, we can see there has been a significant upward trend for the number of people on a zero-hour contract in the past decade. Currently, the data in 2020 shows there are over 1.05 million people on zero hours contracts in the UK. Office For National Statistics has also estimated further growth 0 hours contracts in the Uk.
These contracts prove more and more popular as they provide flexibility for both employees and employers. The downside of being on a zero hour contract is that it can be more challenging to provide proof of steady income to a lender and obtain a mortgage, but it doesn’t mean it’s impossible.
Zero hours contract is different from traditional work contracts. It is an agreement between an employer and employee where the employer has no obligation to offer and pay a worker a minimum amount of hours, and a worker has no commitment to the employer to accept work unless they want to.
When work arises, an employer will offer the work to an employee and it is their decision whether to accept or decline the work. It provides flexibility to employers as they don’t have to pay staff a wage when work levels have reduced and they are not required. This type of contract is popular in the catering and hospitality industry, where staff levels can fluctuate.
This type of contract is favoured by people who are seeking flexible hours or occasional employment, such as students who wish to work along with their studies, semi-retired people or women who are also raising young children and many more. Although workers on zero hours contract have similar rights to other types of work contracts, some workers find they are not offered as many hours as they would want to and can work.
How to get a mortgage on a zero hours contract
Mortgage Lenders can be wary when it comes to lending to borrowers on zero hours contract as they need to assess a borrower’s steady incoming and outgoings to ensure they can afford a mortgage. Since work is not guaranteed and employers are obligated to provide any minimum amount of work, a lender will be concerned whether the borrower can keep up with mortgage payments if in the instance no work is offered .
It is important to have an established track record of work before applying for a mortgage. Every Mortgage lender has different criteria’s and requirements from an application, but they will most likely want to see a history of payslips and will require a worker to back date many more months than compared to a regular permanent contract. Usually, lenders require at least six months’ payslips, but 12 months is more likely preferable unless the zero hours contract work is to supplement another income or applying as a second borrower.
In the past, some mainstream lenders would flat out refuse a worker on zero hours contract, but the good news is since this type of contract has become increasingly popular, many lenders are now open to consider this type of application. Due to these circumstances, it is vital to submit and present a lender your application in the best way possible, so seeking expert advice may increase your chances of being accepted and you can start onto the property ladder.
How much deposit will I need if I am on a zero hours contract
Generally, the mortgage terms you will be presented with are the same as anyone else and a minimum of 5% deposit may be acceptable by the lender, although 10% might be preferred. It can also depend on our factors, such as if you have bad credit, then a
lender might require 15% deposit. It is worth noting, the larger your deposit, the better are your chances of being accepted for a mortgage loan. It also opens up many more products available to you if your deposit is higher and could mean you’ll receive a better rate and lower your monthly payments. It is always better to contact a bit of expert mortgage advice before starting your application with a poor credit rating.
Can I get a mortgage if I have bad credit history and on zero hours contract?
It’s not completely impossible to be offered a mortgage if you have adverse credit and on zero hours contract although it limits the amount of lenders to choose from as it could seem more risky to lenders. Some lenders will make judgement on an independent basis and assess how long ago since the credit issue occurred and the severity of the situation along with your submitted application. For any type of mortgage application, it is wise to check your credit history early and there are a number of sites which offer this service for free.
Next steps- Zero-Hour Contract Mortgage
Getting a mortgage on a zero hours contract may seem complex and difficult, but with the help of professional advice it can help with making the process easier and match you up quicker with appropriate lenders. A whole of market mortgage advisor will know which lenders are more likely to offer mortgages for zero hours workers and increase your chances of a successful application. Get in touch with us today if you are looking to get a mortgage and on a zero hours contract.
FAQs – Zero Hour Contract Mortgage
What does ‘zero’ mean in relation to a zero-hours term contract mortgage?
The term ‘zero hour’ refers to the number of hours worked by an employee. It can be applied to any type of employment, including part-time or full-time work, and it refers to how many hours are actually worked each week. The concept behind this phrase is that employees should not have to put in more than they get out.
Which lenders are good for zero-hours contract mortgages?
The answer depends on what kind of job you do and where you live. If you’re based in London, most major banks should accept applications from people working on zero-hour contracts. However, they won’t necessarily give you the lowest rates. In fact, because they don’t want to lose customers who aren’t able to pay their bills, they tend to charge slightly higher interest than other providers. So, if you’re living outside London, you’d probably be better off going directly to one of the specialist brokers that specialise in helping zero-hour contractors find finance. In addition, a market broker could help you get the most suitable mortgage deal from a specialist lender.
What level of deposit do you need for a zero-hours contract mortgage?
This varies depending on whether or not you’ve got a guarantor. The standard requirement is between 3%-5%. However, some lenders may ask for 6%. You can usually apply without having a guarantor, though, so it really comes down to personal preference.
How much money am I required to put down when applying for a zero hours contract home loan?
You generally only need to provide proof of income and bank statements showing regular deposits into your account. But to get additional details, you may need to contact a market broker.
Is is possible to get a zero-hours mortgage for a first-time buyer?
Yes, it is possible to get a zero-hours mortgage for a first-time buyer, and there are also various government schemes available.
Is a zero-hour contract classed as permanent?
No, the zero-hour contract is not classed as permanent.
Which lenders are best for zero hours contract loans?
It’s important to remember that all lenders are different, and therefore we cannot guarantee that every lender will approve your application. We recommend contacting several lenders before deciding which ones suit you best. You can also contact a financial advisor to help you research from all 0-hour contract mortgage lenders.
Can I get a zero hours contract for my business?
If you run a small business, you can use a zero-hours contract to cover staff costs. This would include things like office cleaners, receptionists etc.
Are zero hours contracts illegal?
There has been no legislation passed regarding zero-hours contracts, but the law states that employers must offer workers at least 28 days notice of termination.
Can you get a mortgage without a contract job?
Yes, although many lenders require evidence of employment. It’s worth checking with a few lenders to see how they handle these situations. For example, some lenders might allow you to show previous earnings instead of current earnings, while others might expect you to prove continuous employment over an extended period.
How does a zero-hour contract work?
A zero-hour contract means that you have agreed to perform certain tasks for a company for a set amount of time each week. If you fail to complete any task within this timeframe, then you risk being fired. Zero-hour contracts are often used by companies looking to cut back on labour costs. They are particularly popular among smaller businesses where employees are hired on a short term basis.
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