Around one million people in the UK are on zero-hour contracts and if you are amongst this number, you might be worried about your ability to qualify for a mortgage.
So, is it possible to get a mortgage on a zero-hour contract? Yes, it is possible to get a mortgage on a zero-hour contract.
Admittedly, some lenders don’t offer mortgages to zero-hour contract workers because they are worried they don’t have a regular monthly income.
But there are other lenders who do offer zero-hour contract mortgages. The key is in knowing where to look! As whole-of-market mortgage brokers, we know which lenders offer mortgages to people on zero-hour contracts so can point you in the right direction. But to gain access to their mortgage loans, you will need to meet their criteria.
Keep reading this guide to learn more and then get in touch with our team if you’re currently looking for a mortgage on a zero-hour contract.
What is a zero-hour contract mortgage?
There is no distinct mortgage product known as a ‘zero hours contract mortgage’ so you will have access to the same loan terms, borrowing amounts, and interest rates as everybody else, provided you meet the eligibility criteria set by most lenders.
However, some specialist lenders have tailored their mortgages for people on zero-hour contracts so if you don’t qualify for a regular mortgage, you may still meet the requirements for one of these.
Such lenders recognise the differences in working arrangements for zero-hours workers as opposed to employees with full-time contracts, so are more flexible with their criteria. This doesn’t mean you will be automatically approved for a mortgage, but your chances of approval will be higher with a specialist lender than those mainstream lenders who won’t consider a zero-hours contract income.
Can you get a mortgage on zero hour contract?
Getting a mortgage on a zero-hours contract is certainly possible but as some lenders will consider you to be a high-risk borrower, they won’t lend to you unless they are satisfied you have the financial ability to make your mortgage repayments.
When assessing your case, they will consider the following.
Your employment history
If you have been working in the same sector or with the same employer for years, most mortgage lenders will be satisfied that your employment is secure. As such, they may be willing to offer you a mortgage.
But if there are large gaps in your employment history or if you have just started a new job on a zero-hours contract basis, some lenders may be cautious about lending to you.
The role you have and your occupation
Your occupation and the role you have can have a major impact on your mortgage application. If you are in a role that requires skills and qualifications that have taken a lot of time to achieve, your mortgage chances will be improved because moving onto a new job will be less difficult for you than somebody who has very few skills and qualifications on their resume.
As with any mortgage applicant, the lender will consider your income when assessing your affordability for a mortgage. This is because they need to make sure you have the ability to make your loan payments.
Your income may be seen as less stable than someone on a full-time contract with a guaranteed income but provided your earnings are high enough for a mortgage, your application should still be considered.
How to get a mortgage on a zero-hour contract
To get a mortgage on a zero-hour contract, the following is advised.
1) Gather the appropriate documents
Your mortgage lender will need to see proof of income (such as your bank statements), proof of your ID (eg. your driving license), and proof of your address (such as your utility bills), so you should pull these together as soon as possible. To improve your mortgage chances, you should also provide evidence of your ability to remain in employment. You can do this with any employment contracts you have been given over the last few years, even if they have all been on a zero-hour basis.
2) Check your credit file
You won’t necessarily be ruled out of a mortgage if you have a bad credit score as specialist lenders may still consider your application. However, it is still wise to improve your credit rating before your application as a wider range of lenders and mortgage deals will then open up to you. Check your credit reports held by the main credit reference agencies, such as CheckMyFile UK, Experian, Equifax, and TransUnion, and if you notice your score is low, take steps to improve it before you approach a mortgage lender.
3) Speak to an expert mortgage broker
As the number of lenders offering zero-hour contract mortgages is very small, you should speak to a fee free mortgage broker who will be able to tell you which lenders are likely to grant you a mortgage approval. As a mortgage broker will also offer you support and guidance throughout the mortgage process, your life will be made much easier if you decide to use the services of a specialist, such as ourselves.
Will I need a large deposit as I’m on a zero-hour contract?
How much deposit you will need to put down will depend on the mortgage provider you choose and the loan-to-value deals you are eligible for. Most lenders will require you to make a larger minimum deposit because of the risks associated with your income structure. However, it may still be possible to get a 95% mortgage or a 90% mortgage that only requires a 5% or 10% deposit of the property value with the help of a specialist mortgage broker.
There are advantages to making a larger deposit as some lenders will offer you more competitive mortgage deals if you can put down more than 10%. You will benefit from a mortgage with a lower interest rate and smaller monthly repayments, so even if you are eligible for a mortgage with a smaller deposit, it’s still worth paying more upfront if you can.
Lenders that offer zero-hour contract mortgages
A number of mainstream lenders will consider zero-hours contract workers, including Halifax, NatWest, and Santander. But as they all have their own criteria for people on zero-hours contracts, you should only apply to those who are likely to grant you a mortgage approval.
Some lenders will only accept NHS and key workers, for example, and some will only allow your zero-hours contract pay if it’s your secondary income, i.e. in addition to earnings from a full or part-time job.
There are mainstream lenders who will accept your zero-hour contract income if it’s your sole source of earnings but they may have certain stipulations in place. Halifax, for example, will consider your application if you have been in a contract for over 12 months with the same employer or have been in the same line of work for this length of time.
To find out which mortgage providers will consider your situation, speak to a member of our team. It might be that a mainstream lender will accept your application but if there is a chance that you will be rejected, we will consider the specialist lenders who offer tailored zero-hour contract mortgages to people in your position.
Buy to let mortgage lenders for zero-hour workers
It may be easier to get a buy-to-let mortgage than a residential mortgage if you’re a zero-hours contract worker as the property you purchase will provide you with rental income. This will do much to satisfy the lender that you’ll be able to make your mortgage repayments, although some will still need assurance that you’re able to pay for your mortgage if you have a shortfall of tenants.
Again, finding the right lender is key. While some will have very few requirements, there are others that will have stricter criteria. Some lenders will ask you for a bigger deposit, for example, while others might require you to be a homeowner.
If you’re looking to purchase a buy-to-let property, speak to a mortgage advisor at YesCanDo Money. We know which mortgage providers offer buy-to-let mortgages to workers on zero-hours contracts so can point you in the direction of those who will offer you the best mortgage deal.
Adverse credit lenders for zero-hour applicants
There are a few lenders who will consider your application if you have a poor credit score but your chances of approval will depend on how severe your credit issues are or were.
This applies to all mortgage applicants regardless of employment status but as you may have a fluctuating income, it could be harder for you than somebody with a full-time contract to get a mortgage if you do have bad credit.
That being said, it’s not impossible to get a mortgage as lenders consider applicants on a case-by-case basis. If you have been declared bankrupt or had a county court judgement (CCJ) in the last six years, you will struggle to find a lender who’ll accept you. But if your credit score is poor because of a few missed bill payments several years ago, you may still be accepted provided you have since paid all of your bills on time.
We can let you know which lenders are likely to offer you a mortgage if you have adverse credit but we still recommend that you improve your credit score as you will qualify for mortgages with more favourable interest rates if you do.
Related reading: Our advisors are often asked: Is it possible to get a mortgage for freelancers?
How many employees are on a zero-hours contract in the UK?
Zero-hours contracts has been a controversial subject in the UK, with some people arguing that they provide flexibility for both employers and employees, while others arguing that they can be exploitative and leave workers with little job security.
It is difficult to accurately determine the exact number of employees on zero-hours contracts in the UK, as the definition of a zero-hours contract can vary and not all employers are required to report data on the use of such contracts. However, according to the Office for National Statistics (ONS), from October 2021 to the end of September 2022 an estimated 1.1 million people in the UK were on zero-hours contracts as their main job. This represents an average of 3.2% of all employment in the UK.
Below is a bar chart to highlight and showcase the number of employees on a zero-hours contract every year from 2000 to 2022.
Specialist advisors for workers looking for a mortgage for zero hours contract mortgage
If you’re on a zero-hours contract, your chances of getting a mortgage approved will be increased if you use the services of a specialist mortgage advisor.
After getting in touch with our team, we will give you all the advice you need with regard to zero-hours contract mortgages. We will then search the market for the most suitable lender and after finding you a great mortgage deal, we will prepare your mortgage application on your behalf to ensure it ticks all the right boxes for your chosen mortgage provider.
To learn more and to arrange your first appointment with us, fill out the contact form below or get in touch with us via WhatsApp or by calling us at 033 0088 4407.
If you’re on a zero-hours contract, you are classed as either an employee or a worker, depending on what is written in your contract. But regardless of status, you are entitled to the same statutory employment rights as employees on a fixed-term contract, including sickness and holiday pay.
The exception is if you’re a freelancer or some other self-employed person working on a zero-hours arrangement with your clients. You are still classed as ’employed’ but as you will be working for yourself, you won’t have the same employment rights as somebody working for an employer.
Not all lenders on the high street offer mortgages to people working on a zero-hours contract but Barclays do. But as is the case with most lenders, you will need to meet their specific requirements before being approved for a mortgage. For Barclays, you need to have been contracting for at least 12 months with no more than a 6-week gap at any point during the last year. But even if you are eligible for a mortgage with Barclays, it’s still worth speaking to our team as there could be another lender offering a better mortgage deal.
As a zero-hour contractor, you may have to pay more on your mortgage as deposit requirements can be higher and some lenders will only offer you mortgages with a higher interest rate.
This isn’t the case with every lender, however. It may still be possible to get a cheaper mortgage provided you meet the minimum income requirement and other criteria set by those lenders who can offer you more competitive deals. We can help you access these so get in touch with us to learn more.