Halifax Contractor Mortgage Guide: Key Lending Criteria and What You Need to Know

Getting a Mortgage as a Contractor with Mortgage-Tek: A Complete Guide to Halifax Contractor Mortgage Lending Criteria

Securing a mortgage as a contractor in the UK can often be challenging, especially when most lenders favour borrowers with traditional, salaried employment. However, Halifax, with its pioneering approach to contractor mortgages, has made it easier for self-employed professionals to secure home loans.

Halifax was the first UK bank to introduce a day-rate mortgage calculation model, eliminating the need for contractors to provide years of tax records or company accounts. Over time, Halifax has expanded its criteria, offering one of the most flexible mortgage solutions available, including for non-IT contractors.

This comprehensive guide outlines everything you need to know about Halifax’s contractor mortgage lending criteria, from eligibility to the application process and income calculations. If you’re a contractor looking to buy a home, here’s all the information you need to secure a mortgage with Halifax.

How Halifax Revolutionised Contractor Mortgages

Halifax was a game-changer in the contractor mortgage sector by recognising that self-employed professionals don’t receive traditional payslips but still earn a stable income. Before Halifax’s introduction of day-rate mortgages, contractors were required to present at least one year’s worth of accounts, a significant hurdle for new contractors.

Expanding the Contractor Mortgage Market

Initially, Halifax’s contractor mortgage policies only applied to IT contractors. However, in May 2013, Halifax expanded its lending criteria, allowing contractors from all industries to access contractor-friendly mortgages. This was a breakthrough, enabling freelancers, consultants, and self-employed professionals to access mortgage funding.

Why Halifax is the Right Choice for Contractors

If you’re considering a contractor mortgage, Halifax offers several key advantages:

1. Early Mortgage Eligibility
   Halifax accepts mortgage applications from contractors even on their first contract, provided they have at least two years of experience in the same industry. Unlike other lenders that typically require two years of trading history, Halifax focuses on your work history and contract value when assessing affordability. 
2. Faster Mortgage Processing
   In today’s competitive housing market, speed is critical. Halifax’s streamlined underwriting process ensures that contractors can secure mortgage offers quickly. Once an offer is made, Halifax works to ensure a swift completion process, reducing the risk of losing a property due to delays. 
3. Flexible Income Assessment
   Instead of basing assessments solely on salary and dividends, Halifax considers the gross value of your current contract. This approach allows contractors to avoid providing company accounts or tax returns to prove affordability. 

Halifax Contractor Mortgage Lending Criteria

To qualify for a contractor mortgage with Halifax, you need to meet specific income, employment, and contract requirements. Here are the key criteria:

1. Income Calculation Method
   Halifax calculates contractor income using the following formula: 
• Daily Rate x 5 (days) x 46 (weeks) = Annual Income for Mortgage Purposes.
  For example, if you earn £400 per day, your annual income for lending purposes would be:
• £400 x 5 x 46 = £92,000.
  This method typically allows contractors to borrow more than traditional salary-based calculations.
2. Minimum Daily Rate Requirements
• IT Contractors: No minimum daily rate is required.
• Non-IT Contractors: Must earn at least £326 per day.
• Non-IT Contractors working fewer than five days a week: Must earn at least £500 per day.
3. Employment History Requirements
• At least two years of continuous work experience in the same field.
• First-time applicants must provide evidence of past employment in the same industry.
• Employment gaps should not exceed six weeks between contracts.
4. Contract Requirements
• The contract must have at least 4-6 weeks remaining at the time of application.
• Contractors with contracts nearing expiry must provide evidence of renewal or extension.
• An up-to-date CV outlining work experience, skills, and contract history is required.
5. Additional Requirements
• Applicants must be UK residents.
• A good credit score will improve your chances of approval.
• Contractors working through an umbrella company may be subject to additional affordability checks.

How to Apply for a Halifax Contractor Mortgage

1. Prepare Your Documents
   Ensure you have: 
• A copy of your current contract showing income and duration.
• An up-to-date CV outlining your work history and contracts.
• At least three months of personal and business bank statements.
• Evidence of contract renewal or extension, if applicable.
2. Work with a Specialist Broker
   Contractor mortgages can be complex, and working with a specialist broker can increase your chances of approval. A broker familiar with Halifax’s lending policies will help you secure the best deal based on your income and contract terms.
   

    

    

3. Mortgage Application Submission
   Once your documents are ready, the broker will submit your application to Halifax, where underwriters will assess: 
• Your contract rate and income stability.
• Your employment history and any employment gaps.
• Your credit history and affordability.
4. If approved, Halifax will issue a mortgage offer, typically valid for six months. 

Halifax Contractor Mortgage Rates & Affordability

Halifax offers competitive interest rates for contractors, influenced by:

• Loan-to-Value (LTV) ratio – Lower LTV ratios generally secure better rates.
• Credit history – A higher credit score can help secure a better rate.
• Mortgage term – Shorter terms may result in lower rates.

Tip: Increasing your deposit can help you secure a better interest rate and reduce monthly repayments.

Common Challenges & Solutions

• Short Contract Length: Provide a letter from your client confirming contract renewal.
• Gaps Between Contracts: Keep gaps under six weeks or provide an explanation.
• Low Daily Rate: Ensure your income meets the minimum requirements.
• Poor Credit History: Work on improving your credit score before applying.

Final Thoughts: Is a Halifax Contractor Mortgage Right for You?

Halifax is one of the best mortgage lenders for contractors in the UK, offering flexible eligibility criteria, faster processing times, and fair income assessment methods. If you’re a contractor with a stable income and solid work history, Halifax could be the ideal choice for your mortgage needs.

By understanding Halifax’s contractor mortgage criteria, preparing the necessary documents, and working with a specialist broker, you can increase your chances of mortgage approval and move one step closer to homeownership.

Need help securing a contractor mortgage with Halifax?
Contact a specialist broker today to get started!