Over a million people in the UK alone working in the ‘Gig Economy’. This means that a lot of these people aren’t entitled to some of the benefits permanent employees, i.e. sick pay or holiday pay, due to working on short term contracts.
The majority of these workers are operating in professional services, both skilled and unskilled manual workers, and due to the increase in online shopping many are couriers.
Gig economy workers are more prone to finding obtaining a mortgage difficult because lenders treat them as self-employed. In order to get the best possible chance of a mortgage application becoming successful then an applicant will need to build up a solid track record of employment. One year’s history will most likely be required to qualify for a mortgage unless an upcoming contract has a very long time to run.
If a lender decides to treat an applicant as a sole trader then evidence will need to be produced showing net profit which would be the amount that is earned minus the expenses. Although for this, an accountant may be needed.
If the applicant has set up their own limited company then most lenders will be looking at the salary plus dividends that have been declared.
Lenders are seeming to be more flexible with how they choose to assess contract workers because of the high number of them within the economy. If a person has been working this way for a while and hold a current contract then some industries may have their incomes assessed through their ‘day rate’.
If day rate is assessed then it will be times by five then by 46 weeks. Lenders know that a Contractor is unlikely to work 52 weeks a year even if they are not paid for holidays. This method works well for IT Contractors who have the options to choose what contracts they take on.
If an applicant is Self-Employed, then they might want to try and organise what is needed in advance before thinking about applying for a mortgage in the same way that an applicant in the gig economy would. It’s also important to remember that if you are wanting to apply for a mortgage then lenders want to see healthy levels of sustainable earnings, so this may mean paying abit more tax.
In terms of zero-hour contracts, it is possible for this type of applicant to obtain a mortgage too. Again, lenders will want to see 12 months’ earnings before it is possible to apply and they will consider taking an average of earnings over a full year.