What Are the Best Mortgage Terms for Contractors?
What Are the Best Mortgage Terms for Contractors?
Blog Article
Choosing the right mortgage terms is just as important as getting approved—especially for contractors. The terms you choose can impact your monthly payments, flexibility, and how much interest you’ll pay overall.
So what mortgage terms work best for contractors? Let’s break it down.
Fixed vs. Variable Rate Mortgages
Fixed Rate
Interest rate stays the same for a set period (usually 2, 3, or 5 years)
Easier for budgeting—your monthly payments won’t change
Popular among contractors who want financial stability
Variable Rate
Interest rate can go up or down depending on the lender’s rate or the Bank of England base rate
Offers more flexibility, but payments could rise unexpectedly
Tip: Most contractors prefer fixed-rate deals to ensure predictability in case their income varies between contracts.
Mortgage Term Length: Short vs. Long
Shorter terms (e.g. 15–20 years): higher monthly payments but less interest paid overall
Longer terms (25–35 years): lower monthly payments, but more interest over time
What works best? Contractors often benefit from a longer term initially, especially if they’re starting out and want to keep monthly costs lower.
Interest-Only vs. Repayment Mortgages
Repayment: You pay off both interest and capital monthly—your balance reduces over time
Interest-only: Lower monthly payments, but you must repay the full capital at the end
Most residential contractor mortgages are on a repayment basis, unless you’re applying for a buy-to-let mortgage.
Flexibility Matters
Look for mortgages with:
Overpayment options
Payment holidays (rare but helpful in gaps between contracts)
Portability (take the mortgage with you if you move)
Final Thoughts
The best mortgage terms for contractors depend on your career stage, income structure, and goals. Fixed-rate repayment mortgages over a flexible term length are often a solid choice.
At Contractor Mortgage Solutions, we help you tailor mortgage terms that suit your lifestyle and income flow.