Can You Get a Mortgage on a Zero Hours Contract?
With the number of people in the UK on a zero hour contract approaching 1 million – according to recent figures from the Office of National Statistics – it is no surprise that the availability of mortgages for people engaging in this type of work is becoming more and more important. So, is it possible to get a mortgage if you are on a zero hours contract and is it an easy process?
Lenders starting to take note
While it may not be as easy for someone on a zero hour contract to get a mortgage as it might be for someone on a permanent contract, it is still possible. The recent rise in the number of people working this way has also meant that more lenders have started to take note of the need in this area by offering mortgages that are specifically tailored to those on a zero hour contract. One example of this is the Zero hour contract mortgage from Ipswich Building Society. Ipswich have been working for some time now to try and reach out to those who might otherwise be considered as ‘mortgage misfits’ – as they put it. This includes those who may be self-employed, retired borrowers or divorcees, for example, and they have now added those who work on a zero hours contract to the list.
Why can I get a mortgage with some lenders but not others?
If you are currently working on a zero hours contract, then you may be wondering why some lenders might be more likely to accept you for a mortgage than others? The main answer to this would be due to the way in which certain lenders assess each mortgage application. Smaller lenders, like Ipswich, will be more likely to have a human being assessing your mortgage application, something known as manual underwriting. This means that your mortgage application is less likely to be ‘thrown out’ because of a simple misunderstanding. Larger and more mainstream lenders, on the other hand, often use computers to do the bulk of their underwriting. This means that as soon as you enter that you are not on a permanent contract, your chances of being accepted for a mortgage are more likely to take a hit or your application may even be thrown out completely, just because the ‘computer says no’.
What can you do to help?
So, now you know that it is possible to get a mortgage while working on a zero hours contract, is there anything else that you can do to help your case? Yes. The main thing you can do is to keep a good record of the money you’re earning by keeping hold of your payslips and P60s. Many lenders who are willing to lend to those on a zero hour contract will want to see that you have been earning enough money to be able to afford the repayments over a specific period of time. Usually, at least 18 months of employment history will be required, but some lenders may want to see much more than that. If you have worked for a few different employers then the easiest way to prove what you’ve earned will be to have your payslips to hand, rather than having to request the proof from your current or previous employers. Another thing which might help is to have some kind of letter from your employer stating the minimum hours you are likely to work in a week. You can then give this to your potential lender to add weight to your application.
If in doubt, pick up the phone
If you’re looking for a mortgage on a zero hour contract then the best thing you can do is to look for a lender who is either favourable toward, or actively seeking out, these kind of borrowers. Always check a potential lender’s lending criteria before making an application, to see if there is anything that might mean your application will be thrown out by a computer. If you find something, then it is best to ring a lender and ask the question before making an application, so as not to damage your credit score by making too many mortgage applications in a short period of time.