Fixed Term Contract Mortgage
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Fixed Term Contract Mortgage
Buying a house with a fixed term contract mortgage can have some extra challenges. Don’t be confused with a fixed rate mortgage. This page helps people who are employed (not self-employed contractors) on PAYE on a fixed term contract. That means it’s a contract that has a set start date, and more importantly, a fixed end date. This means that your employment is not permanent.
Last updated: 24th July 2022
Can I get a mortgage on a fixed term contract?
Yes, some lenders will still consider you, not every lender though. You need to make sure you are applying to a fixed term contract mortgage friendly lender.
Even the banks and building societies that give mortgages to people on a fixed term contract have different rules to each other.
Agency workers on a zero hours contract or are another type of temporary worker you’ll typically need 12 months history.
How long do you need left on a fixed term contract to get a mortgage?
Some lenders need just three months left. They might have other rules though, like having had your contract extended in the past.
But if you have more than six months remaining on your fixed contract at the time you apply for your mortgage, you will have options. It’s then just a case of taking advice to see which one is the best for you. If you have more than a year’s experience on fixed term contracts you may only need 3 months remaining.
Some mortgage lenders will even consider a mortgage application from somebody on a temporary contract before it has even begun. It needs to be starting the next three months and run for at least a year though.
See the do you qualify for a fixed term contract mortgage page and select your specific situation.
Can you get a mortgage on a 12 month contract?
Yes, it’s possible to get a mortgage on a 12 month contract so long as you either have 6 or more months remaining, or have previous fixed term contracting experience. Not many lenders will consider you so work with a mortgage broker specialising in fixed term contacts.
If your total fixed term contract length is under 12 months it can still be possible to get a mortgage so long as you have more than half of the contract’s duration remaining.
Do you need to have already had a contract extension to get a mortgage?
This depends. Some lenders want to see that you have already been on a long term contract for over a year and that it has been extended before they will consider you for a mortgage.
However, there are some lenders that don’t have a minimum time already served on a fixed term contract, nor do they need it to have been extended.
Can you get a fixed term contract mortgage before the job starts?
Yes. There are lenders who make mortgage offers to people who have signed fixed term contracts that don’t even start for another three months!
This is great for people already in work who are waiting for their fixed term contract to start, or people who will be starting their first role on a fixed term contract.
They may have a minimum length of the contract, but if it’s 12 months in total, you certainly have options.
You may also want to see the New Job Mortgage page for more information on this.
Are interest rates higher for people on a fixed term contract?
No not really. The very very lowest ones might not be available to you, but you can still get ‘high street’ interest rates on a fixed term contract mortgage, so long as you know which ones you qualify with.
The better your credit score is the easier it will be to get a lower interest rate as you’ll qualify with more lenders.
How much can you borrow with a fixed term contract mortgage?
Most lenders will treat your affordability the same as somebody on a permanent contract. A rough guide is to times your annual salary by 4.5. This doesn’t account for any credit commitments you may have though.
A couple earning over £70,000 may be able to borrow five times their income so long as there’s a year left to run on the contract or there’s a good history of extension.
The best way to find out is to contact a mortgage advisor for an affordability assessment with a fixed term contract mortgage friendly lender and also discuss what repayments on your mortgage are realistic each month.
What documents will I need to get a mortgage?
You’ll certainly need to provide a copy of your contract. If your job has already started, or you’re finishing off in a current job, your pay slips will be requested. Your bank statements may also be needed. Some lenders will ask for payslips coving a 12 month period, some will ask for just three month, some can just look at a contract starting in the next three months.
A tax return isn’t usually applicable for PAYE contractors but your latest P60 may be requested.
What deposit do I need for a fixed term contract mortgage?
A full range of deposit sizes is available, just like a permanently employed person. This means 5% and 10% deposits options are out there for people on a fixed term contract. It might vary slightly depending on how long you have been on your fixed term contract, and how long you have left though.
A larger deposit will mean you can access lower interest rates.
Larger deposits are sometimes needed on flats and new build houses for people in your situation. Unless you have a very long history of fixed term contracts with a long term still to run, 10% deposits are usually the minimum for flats and new builds. New built flats might require a 15% deposit. It can be possible with a 5% deposit, there are just fewer options.
Will gaps in my work history be an issue?
Potentially. Any gaps will have to be well explained. If the lender thinks you like to take a 12 month contract and then always have 3 months off, they might not want to lend to you.
Gaps that can be explained due to travelling, redundancy or family matters aren’t a deal breaker. They just need to be well explained and make sense.
Can I apply for a mortgage even if this is my first ever job?
Absolutely. Some lenders want to see some work history. They might get suspicious if you are taking this job as your first ever job after not working for a decade.
However, if you have just finished university and you are taking your first role on a fixed term contract, this should be fine. Read more about graduate mortgages and how your student loan affects a mortgage.
See the New Job Mortgage page for more information on this.
Can a first-time buyer get a fixed term contract mortgage?
Of course. Everything on this page applies to first time buyers, home movers, and remortgages.
How much does professional advice cost?
I charge £245 for mortgages where your income is from a fixed term contract.
After you get in touch we’ll have a quick chat on the phone, I’ll ask you some questions, and you can as me anything you like, and so long as I expect you to qualify we will arrange a full appointment. At our appointment I’ll get all of your details so I’m sure you’ll qualify. I’ll send you a list of documents that I’ll need to confirm this and this is when you’d pay the £245. If I can’t get you an agreement in principle or a mortgage offer this would of course be refunded. This rarely happens though as I insist on getting all of your information right at the start of the process.