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Contractor Guide

Umbrella Company Mortgages: A Complete Guide

How to get a mortgage as an umbrella company contractor, including income assessment, documentation requirements, and lender options.

Updated January 20269 min read

How Umbrella Contracting Works

An umbrella company acts as an intermediary between you and your end client (or agency). You're employed by the umbrella, which invoices the agency for your work and then pays you a salary after deducting fees, employer costs, and income tax.

The Umbrella Payment Flow

1Agency pays umbrella your gross day rate
2Umbrella deducts: margin, employer NI, apprenticeship levy
3Umbrella deducts: employee tax and NI
4You receive net pay via PAYE payslip

Why Use an Umbrella?

  • Inside IR35 contracts: Required or preferred by many clients
  • Simplicity: No company admin, accounts, or self-assessment
  • Speed: Start working immediately without company setup
  • Short contracts: Less overhead for brief engagements

The mortgage perspective

From a mortgage standpoint, umbrella contracting sits between employment and Ltd company contracting. You have payslips like an employee, but contract-based income like a contractor. Lenders handle this hybrid situation differently.

Income Assessment

Lenders can assess umbrella contractor income in several ways, and the method significantly affects your borrowing capacity.

Method 1: Gross Day Rate Annualization

Gross day rate: £400

× 5 days × 48 weeks

= £96,000 assessed income

Used by: Some contractor-specialist lenders who look past the umbrella structure to your underlying contract value.

Best borrowing capacity

Method 2: Net Umbrella Pay Annualization

Weekly net pay: £1,150

× 52 weeks

= £59,800 assessed income

Used by: Lenders who treat you like an employee — they look at what you actually receive in your bank account.

Lower borrowing capacity

Method 3: Average of Payslips

3-month average net: £5,100/month

× 12 months

= £61,200 assessed income

Used by: Standard employed assessment — common with high street banks applying normal contractor scrutiny.

Variable based on recent earnings

The umbrella penalty

The same £400/day rate generates very different mortgage outcomes: £96,000 (gross annualized) vs ~£60,000 (net annualized). That's a potential difference of £160,000+ in borrowing capacity. Choosing the right lender matters enormously.

Documentation Required

From Your Umbrella

  • 3-6 months of payslips
  • P60 (if available)
  • Employment contract with umbrella

Your Contracts

  • Current contract (showing rate, dates)
  • Previous contracts (12-24 months)
  • Contract history/CV

Bank Statements

  • 3-6 months personal statements
  • Showing umbrella pay deposits

Additional (Sometimes Required)

  • Reference from umbrella
  • IR35 Status Determination Statement
  • SA302 if previously self-employed

Keep everything organized

Create a digital folder with all your umbrella payslips, contracts, and bank statements. Having these ready before you apply speeds up the process significantly.

Lender Approaches

Day Rate Friendly

These lenders look at your gross day rate rather than net umbrella pay, giving you the best borrowing capacity.

Examples: CMME, CLS Money, some specialist lenders

Requirements: Usually 12+ months contracting history, current contract

Employed Treatment

Treat you like an employee with variable income. Look at payslips and annualize your net umbrella pay.

Examples: Most high street banks

Requirements: 3-6 months payslips, standard employment checks

Hybrid Approach

Consider both your day rate and umbrella pay, using the more favorable calculation for your situation.

Examples: Some building societies, Kensington

Requirements: Varies — flexible manual underwriting

What to Look For in a Lender

  • Calculation method: Do they use gross rate or net pay?
  • Weeks multiplier: 48 weeks is better than 46 or lower
  • Contract requirements: How much remaining term do they need?
  • Gap tolerance: How do they handle historical gaps?

Tips for Success

1. Choose a Contractor-Savvy Broker

Many umbrella-friendly lenders are broker-only. A broker experienced with contractors knows which lenders use gross rate calculations and can navigate the nuances of umbrella income.

2. Time Your Application Well

Apply when you have a current contract with good remaining length (3+ months). If your contract is ending, try to secure the next one before applying.

3. Show Consistent Income

Consistent payslips over several months demonstrate reliable income. Large variations (due to gaps, rate changes, or fewer days worked) may require explanation.

4. Consider Building History First

If you're new to umbrella contracting, consider waiting until you have 12+ months of continuous history. This opens more lender options and typically better rates.

5. Use a Reputable Umbrella

FCSA-accredited umbrellas are widely recognized. Unusual umbrella arrangements (very low fees, unusual payment structures) may raise underwriter concerns.

The bottom line

Umbrella contractors can absolutely get mortgages — the key is finding lenders who assess your income fairly. With the right lender and broker, your borrowing capacity can be much higher than you might expect from just looking at your net pay.

Find umbrella-friendly lenders

Get matched with lenders who use favorable calculation methods for umbrella contractor income.

Get matched

Frequently asked questions