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It’s a common misconception that you need to be employed for at least 3 months to secure a mortgage. Whilst that might be the case for some lenders, it’s certainly not across the board.
Does the length of your employment impact your mortgage eligibility?
In reality, you may need much more or less than 3 months, depending on your employment history and income type.
Having a longer history with your current employer will give you a wider range of options, although for some income types, it’s not essential.
Permanently employed
Being permanently employed is undoubtedly the most straightforward and preferred type of income for mortgage lenders.
If you’re permanently employed with a contract in place, and you’re paid via PAYE, most lenders will often look more favourably upon your income compared to certain other income types.
Minimum employment requirements will vary considerably between mortgage providers, and therefore shopping around is essential.
Some lenders will require you to have been employed with your current employer for at least 3 months, others may only require 1 month.
Some lenders take it one step further and allow you to use a job offer or contract up to 3 months before you’ve even started your job.
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Zero hours workers
Zero-hour workers will usually be required to have worked with their current employer for a longer period of time to be considered for mortgage purposes. This is because the income can be inconsistent, and as the name suggests, there are no minimum guaranteed hours.
Generally, a minimum of 12 months is required, although there are some exceptions. Most lenders will take an average of your most recent 12 months’ payslips.
Contract workers
If you’re a contractor, your previous track history and the length of time remaining on your current contract will have a bearing on the minimum employment term required.
In theory, you could be eligible for a mortgage if you have just started with a new company on a new contract if you have a good amount of time remaining on the contract or have a track history in that line of work,
For example, Halifax state you must have 12 months or more continuous employment, with 6 months of the contract remaining,
or
2 years continuous service (for the last 2 years as at the date of application) in the same type of employment
CIS workers – Construction Industry workers
Most mortgage lenders treat CIS workers differently to PAYE employees, this is because the tax for CIS workers is not deducted at source and the employees deal with their own tax affairs.
The vast majority of lenders will treat CIS workers as self-employed and typically take an average of the last 2 years net profit.
A small proportion of mortgage lenders will treat CIS workers in the same way as PAYE employees, they will usually look to average income from their last 3-, 6- or 12-months CIS payslips.
Self-employed
There are several categories that the self-employed fall into:
- Contractors
- CIS workers
- Sole traders/ freelancers
- Company owners
Sole traders and company owners will generally require at least two years of trading history and account to secure a mortgage; however, they will consider just one year’s accounts. CIS workers & contractors are covered in the earlier sections above.
Does changing jobs stop you from getting a mortgage?
If you’re moving to a new job with a similar or higher salary and basing your mortgage on your current level of income, most lenders will not take issue with this.
They may insist on seeing a contract or job offer letter if they are made aware you’re switching roles.
If you’re moving to a new job with an income lower than your current job, the lender will base your affordability on the new lower salary, however, some lenders may insist on a minimum period of time in the new role, and it may not be possible.
If you’re planning on moving jobs around the same time as moving, it’s worth checking the lender’s criteria on this prior to applying, some will be more flexible than others.
What if my income relies on commissions or bonuses?
If you receive variable pay, like commission or bonuses, lenders will want to ensure they are sustainable and see that you have been receiving from for a period of time.
Lenders will generally average your most recent 3-6 months commission; a smaller proportion will average your income over the most recent one or two years.
Mortgage providers may cross-reference the commission income earned over the last 3 months with income earned last year on your P60, this is to ensure the income over the 3 months is a true reflection of your income and not overstated.
Lenders will vary in the amount of income they use for affordability; some may use 50% of the average commission, and others will use 100% of it. If a large proportion of your income is from commission, you will likely find the amount you may be offered from one lender from another will vary significantly.
Mortgage providers will use the most recent payslips at the point of application, not agreement in principle; therefore, if you have variable pay, it’s worth checking in with your mortgage advisor each month when you receive a new payslip to see what difference if any it makes to your affordability.
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Bonus income
Like with commission and other elements of variable pay, lenders will want to see a track history of bonus income.
If they’re paid quarterly or annually for example, most lenders would require a 2-year track history, although some lenders consider just 1 year.
Some lenders will use all the bonus income, and others will take a percentage of the bonus, for example 50%.
How can Strive Mortgages help?
Starting a new job can be a challenging enough time as it is, let alone moving as well. Having someone on your side to walk you through all your options can take a real weight off your shoulders and, with the right advice and support, give you one less thing to worry about.
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For more information on getting a mortgage with different types of employment, please contact a member of the Strive team, by emailing [email protected] or call us on 01273 002697.
Frequently asked questions about getting a mortgage with different types of employment
Yes, some lenders will consider a future pay rise, so long as it’s guaranteed and confirmed in writing by the employer. They will usually insist on the pay rise taking effect within 3 months of the application.
Yes, there are plenty of mortgage lenders that do not take into account probation periods, however, there are still some who may refuse to lend until you are out of your probation period.
Some others may insist on you having a minimum level of continuous employment if you’re still within your probation period.
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