How Contractor Daily Rates Are Used in Mortgage Calculations

How Contractor Daily Rates Are Used in Mortgage Calculations

Blog Article

As a contractor, you’re likely paid a daily or hourly rate instead of a traditional salary. So how do lenders use that information when deciding how much you can borrow?

The good news is that many lenders—especially those who specialise in contractor mortgages—use your daily rate to calculate your annual income, which can often increase your borrowing potential compared to using salary and dividends alone.

How Do Lenders Calculate Your Income?
When assessing contractor affordability, most specialist lenders use a simple formula:

Daily rate × number of working days per week × working weeks per year

Let’s say:

Your daily rate is £500

You work 5 days per week

Lenders usually assume you work 46 to 48 weeks per year (allowing for holidays)

Example calculation: £500/day × 5 days/week × 46 weeks/year = £115,000 annual income

This figure is then used as your gross income when assessing how much you can borrow.

Why This Benefits Contractors
Using your contract rate:

Avoids complications with limited company accounts

Ignores how much you’ve withdrawn as salary/dividends

Often results in a higher mortgage offer than using traditional income proofs

This method is especially helpful for newer contractors who don’t yet have years of trading accounts.

What Do Lenders Need to See?
To calculate income from your daily rate, lenders typically require:

A copy of your current contract

Proof of your daily or hourly rate

Bank statements showing consistent income deposits

Possibly your CV to confirm experience and contract history

Final Thoughts
Using your daily rate can make securing a mortgage simpler and more beneficial than relying on limited company accounts or umbrella payslips. The key is applying through a specialist lender that understands contractor income structures.

At Contractor Mortgage Solutions, we’ll present your daily rate in the most effective way—helping you maximise your borrowing potential with ease.