Expert Guide to Contractor Mortgages: How Self-Employed Professionals Can Secure a Mortgage

The UK Government’s Help to Buy Scheme: A Guide for Contractors

Introduced in 2013, the Help to Buy scheme was designed to help first-time buyers and home movers secure a mortgage with a smaller deposit. For contractors, securing a Help to Buy mortgage may seem more complicated than for employed individuals, but with the right preparation and expert advice, contractors can take full advantage of the scheme.

This guide explains how Help to Buy contractor mortgages work, the different phases of the scheme, and what contractors need to consider when applying.

What Is the Help to Buy Scheme?

The Help to Buy scheme was rolled out in two phases:

1. Help to Buy Equity Loan: This offered buyers a government-backed loan of up to 20% (or 40% in London) to purchase a new-build home.
2. Help to Buy Mortgage Guarantee: This allowed buyers to secure a mortgage with just a 5% deposit, with the Government offering financial protection to lenders in case of defaults.

While the Help to Buy Mortgage Guarantee scheme ended in 2016, the equity loan scheme remains in place, having already helped thousands of buyers—including contractors—get on the property ladder.

Help to Buy Equity Loan for Contractors

The Help to Buy Equity Loan scheme enables the Government to contribute up to 20% of a property’s value (or 40% in London) as an interest-free loan for the first five years. Borrowers must provide a minimum 5% deposit, with the remaining amount covered by a mortgage.

This scheme is particularly helpful for contractors who may find it challenging to save for a large deposit. However, the equity loan is available exclusively for new-build homes and must be arranged through approved Homebuy agents. These agents will require evidence of a mortgage agreement in principle before granting the equity loan, so it’s crucial for contractors to work with a mortgage broker who understands their unique income structure.

Help to Buy Mortgage Guarantee (Now Closed)

Launched in October 2013, the Help to Buy Mortgage Guarantee scheme enabled buyers to secure a mortgage with just a 5% deposit. Lenders were offered government-backed protection, which encouraged them to offer low-deposit lending. Although this scheme is no longer available, contractor-friendly lenders, such as Halifax, continue to offer low-deposit mortgage options for self-employed professionals.

Challenges for Contractors Using Help to Buy

One common issue contractors face when applying for a Help to Buy mortgage is working with mortgage advisors recommended by home builders. Many builders require buyers to use their preferred brokers, who may not fully understand contractor income. These brokers often base affordability assessments solely on salary and dividends, disregarding contract-based earnings, which can result in unnecessary mortgage rejections.

To avoid this, contractors should obtain an underwritten mortgage agreement in principle from a contractor-friendly mortgage broker before engaging with a builder. This ensures contractors can prove their borrowing potential, avoiding delays in securing their new home.

Help to Buy London

Recognising the higher property prices in London, the Government introduced an enhanced Help to Buy scheme for buyers in the capital. From February 2016, the equity loan limit increased from 20% to 40%, reducing the amount that borrowers need to secure through a mortgage.

Under Help to Buy London:

• The buyer provides a 5% deposit.
• The Government offers a 40% interest-free loan for five years.
• The remaining 55% is covered by a mortgage.

This option is particularly advantageous for contractors looking to buy in London, as it reduces the mortgage borrowing required, making early repayments more affordable.

Help to Buy ISAs

The Help to Buy ISA was introduced to help first-time buyers save for a deposit. For every £200 deposited into the ISA, the Government contributed an additional £50 (a 25% bonus). While new applications for Help to Buy ISAs closed in 2019, existing account holders can still claim the government bonus until 2030.

Looking for Help to Buy Contractor Mortgages?

Navigating the Help to Buy process as a contractor requires specialist knowledge. At Mortgage-Tek, we help contractors secure the best mortgage deals by assessing their full income potential, rather than relying on traditional affordability checks. Whether you’re a first-time buyer or moving home, our team can guide you through the Help to Buy application process and ensure you secure the best mortgage for your situation.

Contact Mortgage-Tek today to explore your Help to Buy mortgage options!