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Zero Hour Contract Mortgages
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.
These contracts and proving more and more popular as they provide a level of flexibility for both employees and employers. The downside of being on a zero hours contract is that it can 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.
What is a zero hours contract?
Zero hours contract is different from traditional work contracts as 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 wishes to work along 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
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 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 lender require at least 6 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 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 professional advice may increase your chances of being accepted.
How much deposit will I need if I am on a zero hours contract
Generally the 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.
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.
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.