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Zero Hour Contract Mortgages

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What is a Zero Hours Contract?

A zero hours contract is the most flexible of working contracts–it is an agreement for work under certain terms, pay, etc, but with no commitment from the employer to provide a minimum number of hours, and no obligation on the employee to accept work offered.

However, an employer may offer regular work for minimal hours, with the possibility of varying an employee’s work hours according to whether periods are busy or quiet.

Mortgages for People on a Zero Hours Contract

There is no distinct mortgage product designed for people on a zero hours contract, and you will have access to the same borrowing amounts, terms and interest rates as anyone else. The key to obtaining a mortgage is proof of income and affordability. If you can show a track record of regular work–usually a minimum of twelve months showing consistent hours worked and income through that period–then you should be able to get the same offer as any other self-employed person or salaried employee.

If your income from a zero hours contract is only a smaller part of other income that is being considered around the mortgage application–such as if you were a named second borrower in part-time work, or if this was a second income stream on top of your main earnings–then lenders will probably be more flexible about how much work history in this contract you need.

Zero Hour Contract Mortgages

Can I get a mortgage on a Zero Hours Contract?

As the employer has no obligation to offer work, and the employee no obligation to accept it, obtaining a mortgage based only on a zero hours contract can be more challenging than if you were in a regular permanent contract.

This said, it is still possible for you to be considered for a mortgage by a more open-minded lender who will take a wider view of your employment. As long as you have a track record of at the very least six months (but most lenders prefer a minimum of twelve months), then the lender is likely to view your income as ‘regular and permanent’ and accept the application.

How much deposit do I need on a Zero Hours Contract?

You would be working with the same terms as anyone else applying for a standard mortgage, so the minimum deposit is usually 5%, although 10% is sometimes preferable. It’s worth bearing in mind that a larger deposit will enable you to access deals with more favourable interest rates and lower monthly repayments.

Can I get a Zero Hours Contract Mortgage with Bad Credit?

Getting a mortgage with a zero hours contract income when you also have a poor credit record could be a challenge, but it is not impossible at all.

A lot will depend on the severity of the adverse credit event, and how long it has been since it occurred. A few missed or late payments on a phone contract or store card three years ago will matter a lot less than a County Court Judgement made in the last twelve months.

We’ll need to have a full discussion with you about your individual situation in order to advise you of all your options for obtaining a mortgage.

Can I get a 'Help to Buy' Mortgage on a Zero Hours Contract?

Yes, this is entirely possible. The government’s Help to Buy scheme was set up to enable people who would otherwise struggle with a deposit to get their feet on the property ladder when buying a new-build property. Under the scheme, you can get a loan of up to 25% of the property value (or 40% in London) interest-free for the first 5 years–if you have a 5% deposit, then you might only need a 70% mortgage.

You will simply need to meet the usual mortgage criteria around income and affordability–if you do so, then there should be no barriers.

Can I get a Buy to Let Mortgage on a Zero Hours Contract?

Obtaining a Buy-to-Let mortgage on a zero-hours contract might require you to work through more documentation, but it still could be possible. A lot might depend on how your broker presents your application and income information to the lender, and while the affordability of a Buy-to-Let mortgage is usually measured against the projected rental income, some lenders may still like to see a minimum level of earnings.

If you are already an existing landlord, then the process is likely to be a lot smoother due to your previous experience in the business. If you are a new landlord working on a zero hours contract, then you will probably need to show twelve months’ work history in your current role.

 

Zero Hours Contract Mortgage Rates

The rates on these types of mortgage applications are not any different to those on standard mortgages, and you will not be subject to any premiums or weighting according to your employment status.

Zero Hours Contracts Mortgage Lenders

There are a wide range of niche-market lenders who specialise in catering to the needs of applicants who do not fall into the conventional employment category. Their criteria will be different from one lender to the next, but they will all consider your application on its merits and take a broader view of your income than a mainstream lender on the high street.

We will need to conduct a careful assessment of your circumstances and requirements to understand which lenders we could recommend applying to, but we will know which ones are likely to be most suitable for your needs. Speak to one of our team of advisers, or arrange a meeting through the contact form, so we can discuss your needs in greater detail.

Are specialist Mortgage Lenders safe?

As relatively new contenders on the market, you might be forgiven for wondering if you can trust smaller, specialist lenders. But rest assured, they are governed by the same laws and regulations as the traditional high street banks and building societies, and are just as reliable.

If for any reason your lender went under and entered administration, then your mortgage would be passed to another provider or mortgage administration company. Current UK laws protect you in these circumstances–your payment terms will remain the same, the original mortgage terms will be honoured and your mortgage cannot be recalled.

These laws are the same for both high street lenders and specialist lenders alike, so your mortgage will be safe whoever you arrange it with.

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