What is contract-based underwriting?
Contract-based underwriting assesses your mortgage on the value of your current contract — your day rate annualised — instead of historic accounts, SA302s or payslips. It’s the foundation that lets contractors borrow on what they earn now — and most specialist lenders, plus several mainstream ones, will assess a case this way even for the newly independent.
The core idea
Rather than looking backwards at filed accounts, a contract-based lender reads the contract in front of you: your day rate, days worked and the engaging company. That figure is annualised — typically day rate × days × 46 weeks — and a multiple applied.
This bypasses the documents that understate contractors: net-profit accounts and minimised SA302s.
Why it exists
High-street algorithms were built for permanent employees and traditional businesses. Drop a contractor into them and you’re forced into a ‘self-employed’ box demanding years of history. Contract-based underwriting, handled by specialist teams, corrects that mismatch.
Who can use it
- Day-rate professionals — IT, engineering, consulting, offshore and more.
- Newly independent contractors, sometimes from day one of a contract.
- Those moving between contracts with a clean recent history.
- It reads your current contract, not historic accounts.
- Income is annualised over 46 weeks, then multiplied (usually 4.5×).
- It opens the door for newly independent contractors.
- Placement with the right lender is what makes it work.
Underwriting, answered
Is contract-based underwriting only for IT contractors?+
No — it suits any professional paid a day or hourly rate against a contract, including engineering, consulting, offshore and medical locum work. The common factor is a clear contract rate to assess.
Do I still need any accounts?+
Often not for the income assessment itself, though some lenders like to see recent bank statements or a short history. The point is that a lack of two or three years’ accounts isn’t the barrier it is on the high street.
How is this different from a self-employed mortgage?+
A self-employed assessment uses net profit from your tax return; contract-based underwriting uses your gross contract rate. For most contractors the latter produces a much higher, fairer figure.