How Day Rate Contractor Mortgages Work

If you’re a day-rate contractor in the United Kingdom, you’d already know that your income is not the same as that of salaried professionals. After all, you don’t receive a fixed monthly income—you’re paid for the work you do.

 

Day-rate contractor mortgages are tailored services offered by certain lenders in the UK. The key is understanding how lenders calculate contractor income and why contractors are assessed differently from traditional PAYE employees.

Different Types of Daily Rate Contractors

Not all day-rate contractors work in the same way. Understanding which category you fall into can be a useful step to determining how your income is assessed and which lenders are most suitable.

• Contractors who work on a daily or hourly basis. They complete work for one client and then move on to a new contract with another employer.
• Freelancer contractors who work as self-employed and often take on jobs on a short-term basis.
• Locum workers who work with an agency to provide short-term cover for an employer.
• Consultant contractors who are hired by agencies on a temporary basis to provide professional services.

Why Contractors Are Assessed Differently From PAYE

Lenders calculate affordability based on the contractor's annual salary, payslips and employment history. While this can be simple for professionals who are on a regular PAYE contract — stable income, predictable employer, consistent deductions.

 

Day-rate contracts don’t fit that mould. You may be earning well, but your take-home income can look lower than your actual earning power due to limited company structures and sometimes irregular invoicing. The lenders familiar only with PAYE can underestimate affordability for contractors.

How Lenders Calculate Contractor Income Using Day Rates

Lenders do not rely only on tax returns or company accounts alone to calculate. Instead, your income is calculated on your day rate. Here’s how it works:

 

Current Contract Rate: Your daily income is considered, for example, £500 per day.

Working Pattern Assumptions: A standard number of days worked per week (often 5 days).

Annualisation: Your day rate is multiplied by the assumed number of working days in a year. It is often 46 and 48 weeks to allow for holidays or gaps between contracts.

 

So here is how it is calculated:

£500 per day

5 days per week

46 weeks per year

That’s:

£500 × 5 × 46 = £115,000 gross annualised income

What Lenders Look for Beyond the Day Rate

Before offering a mortgage to contractors, lenders also consider other factors:

• Length of your current contract
• Contract history
• Industry sector
• Credit profile

Day-rate contractors are not required to prove stable account details to qualify for a mortgage. Some lenders in the UK also underwrite based on a single strong contract, provided it’s long enough and at a sustainable rate.