Can You Get a Mortgage on a Fixed-Term Contract?

In the UK labour market, approximately 95% of workers have permanent contracts, while just 5% hold temporary or fixed-term roles.

Since fixed-term work is relatively uncommon, lenders tend to view these roles as slightly higher risk. 

If you’re looking to get a mortgage while on a fixed-term contract, don’t worry. A mortgage is still possible with a fixed-term contract if you meet certain conditions. 

In this guide, we’ll explain how lenders assess such applicants and what you need to do to strengthen your mortgage application.

How Lenders Assess Fixed-Term Workers?

Lenders want to be confident that you can make repayments. With fixed-term contracts, they’ll ask key questions about your job. 

They will look at contract details (start date, end date, length and renewals) and work history. 

For example, many lenders prefer you to have at least 6-12 months on one contract, and some prefer a total of 1-2 years of contracting in the same line of work.

Moreover, some sectors are viewed as stable even on fixed contracts. 

For instance, teachers or doctors on a 12-month contract may be more acceptable because there is a high demand in those fields.

Lenders may also check if you have a renewal or future contract in place – a written job offer or extension letter can boost your case.

In addition, other standard factors still apply. Lenders will consider your income and affordability, which includes how much you earn and how much you can afford to repay. 

Most lenders in the UK will treat your income the same way as a permanent worker’s income, often averaging it over time.

What Documents Are Needed?

To apply for a mortgage on a fixed-term contract, you’ll need to prove your identity, income, and job status. Key documents include:

Signed employment contract

Lenders usually want a signed copy of your current contract showing job title, pay, and dates. Ensure it is a physically signed contract (typically requiring two signatures) to avoid delays.

Payslips

Typically, the last 3-6 months of payslips to show regular income. Some lenders may ask for up to 12 months if you are on very short contracts.

Bank statements

Recent statements (3-6 months) to verify that salary is paid into your account regularly and to check your outgoings.

Tax returns or accounts

If you have any bonuses, commissions, or are self-employed alongside your contract, provide tax returns or certified accounts.

Proof of renewals or offers

A letter from your employer confirming renewal of your contract or a formal job offer for a new contract can reassure the lender of future income.

Photo ID and address proof

Standard IDs (passport or driver’s licence) and a recent utility bill or bank statement to confirm your address.

In general, you should gather the same documents as a permanent worker, plus extra evidence of your fixed contract. 

How Much Can You Borrow On A Fixed-Term Contract?

Lenders decide how much you can borrow based on your income and deposit. A higher deposit (i.e., lower loan-to-value, or LTV) makes approval easier. 

Most lenders will allow at least a 5% deposit for a standard mortgage, but on a fixed-term contract, you will often need more. 

Many mortgage advisers recommend aiming for a 10-20% deposit to increase your chances.

For example, imagine buying a £200,000 house with a £20,000 deposit. Your deposit covers 10% of the price, so you need a £180,000 mortgage. That is a 90% LTV loan.

You can use our LTV Calculator to calculate your loan-to-value ratio based on your deposit.

Once you have a deposit, lenders typically calculate your maximum loan as a multiple of your income. Generally, this is 3 to 5 times your salary.

Types of Mortgages Available

Even with a fixed-term contract, you can choose from the usual mortgage types. 

The most popular type in the UK is the fixed-rate mortgage. In fact, in 2023, about two-thirds (63.4%) of new UK mortgage deals were two-year fixed rate loans, and around 27% were five-year fixed deals.

A fixed-rate mortgage locks in the interest rate (and monthly payment) for a set period (often 2, 5 or 10 years). This can be reassuring since your payments won’t rise even if the Bank of England base rate goes up.

Other options include tracker mortgages, which track the Bank Rate plus a set margin. Tracker rates often start a bit lower, but your payments will rise or fall as the base rate changes. 

These are less popular now but still available for borrowers who understand the risk. 

Standard Variable Rate (SVR) mortgages are another type; you pay the lender’s default rate (which can change at their discretion).

Tips To Boost Your Mortgage Approval Chances On a Fixed-Term Contract

If you’re on a fixed-term contract, it pays to prepare carefully. Here are some simple tips:

Save a larger deposit. The more you put down, the lower the LTV, and the more lenders will consider your application.

Build a good credit record. Make sure your credit report has no errors, pay off debts and avoid new borrowing. A clean credit history shows you’re reliable, which lenders want.

Gather strong evidence of income. Show all payslips, bank statements and contract letters. If you’re nearing the end of one contract, see if your employer will renew it or issue a future contract. Even a written contract that’s a few months away from starting can work in your favour.

Maintain job continuity. Try to avoid long gaps between contracts. Lenders prefer applicants who have worked continuously for at least 12 months. If you have had gaps, be ready to explain them.

Consider a specialist mortgage advisor. Many lenders (up to 75 out of 100, according to one adviser) are willing to lend on fixed-term incomes. A mortgage advisor who deals with contractors can match you to the right lender and handle the complex paperwork.

Check you have 6+ months remaining. Some lenders may require at least half a year left on your contract. If your contract is ending soon with nothing lined up, it may be better to wait or seek a guarantor.

Use a guarantor if needed. If you’re really struggling to meet the criteria, having a family member guarantee part of the mortgage can help. This person promises to cover payments if you can’t.

Frequently Asked Questions

Can I remortgage if I’m on a fixed-term contract?

Yes. Remortgaging works the same way as for any borrower. If you continue to meet the affordability and contract criteria, lenders will consider you.

What if my fixed-term job ends before I move into the house?

This can be tricky. Lenders usually want proof of income for the full mortgage term. If your contract ends before completion, you should ideally secure a renewal or new role.

Can someone on a zero-hours or casual contract get a mortgage? 

It’s harder but possible. Check our zero-hour contract mortgages guide for more details.

Are there special contractor mortgages? 

Some brokers mention this term, but there’s no unique product. Those are just ordinary mortgages targeted at contract workers.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.