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Contractor Mortgage Umbrella Companies - how does it work?

Many contractors choose to work through an umbrella company, but what does this mean for mortgages? Mortgages by McAteer have lots of experience in finding umbrella mortgages for contractors.

What is an umbrella mortgage?

An umbrella mortgage isn’t a specific type of mortgage, it’s a term sometimes used in seeking out mortgages for contractors who work through an umbrella company. 

All mortgage products are largely the same, but the way lenders assess contractors and the criteria they apply to their mortgages can vary enormously. Because of that, it is much simpler to find a contractor mortgage by working with a good broker. 

We look at securing a mortgage with a lender that will give you the most favourable deal. The good news is that many providers, including some high street lenders, understand the world of contracting and will work hard to attract you as a customer.

Can I get a mortgage with an Umbrella Company?

Yes, it’s no problem to find a mortgage as an umbrella contractor. What’s crucial is finding a mortgage lender that understands contracting, as this will affect how much you can borrow and potentially the rates you’re offered. 

Under an umbrella company, you are an employee of the scheme. The umbrella company manages the payments from your client and pays you a monthly salary. You pay the umbrella an admin fee for this service. 

Some lenders will simply see you as an employee, and take your income based on your monthly payslips. Others may accept your contracting day rate as your income, which may allow you to borrow a lot more. 

What are Limited Company or Umbrella Company Contractor Mortgage Options?

There are similar variations in lenders when it comes to contractors who operate through a limited company. Some will take your income as your salary plus dividends, while others will include net profit in your accounts. 

This is a complex area, but mortgage brokers like us have lots of experience in matching the right lender to your specific circumstances and goals. 

How do you prove income?

Different lenders have their own requirements, depending on how they assess you. Some will require payslips, while others will want to see details of your current contract(s), previous appointments and in some cases your CV. This is all about understanding your contract rates and continuity of your work.

The details of your contracts are important. If you have at least 6 months or 12 months left on your current contract, that will significantly increase your options.

If you run a limited company you will need to share company accounts that state your salary and dividends.  

Lenders explore your income, outgoings and credit score to check that you can comfortably afford the repayments on your mortgage.

Are Umbrella Companies Affected by IR35?

The reason that many people choose to work through an umbrella company is to ensure they comply with IR35 – the ‘off payroll working’ tax rules. In October 2022, the government announced changes to IR35, so umbrella company workers should continue to review how they structure their contracting in future.

What is the importance of specialist Contractor Mortgage Advisers?

Mortgages for umbrella contractors is certainly a niche area and you will benefit greatly from working with specialist mortgage brokers.

We will get to know you, your business and what you’re looking to achieve with your mortgage. Then, we will link you up with the most appropriate lenders to meet your goals. We’ll get you an Agreement in Principle and then support you through the mortgage application. 

Because we understand contracting and umbrella companies, it significantly speeds up the time it takes to find you a good mortgage deal. 

Mortgages by Mcateer Ltd is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.


Approved by The Openwork Partnership on 02/01/2024