Last Updated: 31-01-2020
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They’re questions clients ask us repeatedly:
- What’s the difference between an umbrella contractor and an umbrella employee?
- If I work through an umbrella company, can I get a mortgage?
Umbrella contractor vs umbrella employee: what’s the difference?
For mortgage purposes, there’s little difference between an umbrella contractor and an umbrella employee. It’s often just a case of terminology.
Both types of worker take on short term contracts, often through an agency. Both use limited company payment structures. Both get payslips (but not traditional payslips). And both tend to charge day rates and submit weekly invoices.
The key difference to note is that an umbrella employee is not an employee in the traditional sense. Yes, both sets of ’employees’ get payslips. But it’s doubtful a generic mortgage advisor will understand umbrella payslips.
The confusion arises because umbrella payslips show more deductions, fees and different National Insurances. Using them as evidence for a High Street lender could do your mortgage aspirations more harm than good.
Umbrella contractor/employee mortgage options
We can get competitive mortgages for umbrella contractors (or ’employees’, if you prefer). As with limited company contractors, we use contract-based underwriting to determine affordability.
That means we’ll use your gross contract rate to work out how much you can afford to borrow. For the same reasons as already stated, we won’t use post-deduction payslips.
You may convince yourself that you stand more chance of getting a mortgage as an ’employee’ than as a contractor. But because you work through an umbrella company, you fall into the specialist borrower niche.
A broker who understands contracting is an umbrella worker’s best hope of getting a competitive mortgage. At least a mortgage for a value that reflects your true earnings potential.
When an underwriter receives an application, their immediate thought is ‘risk’. They must be certain that you can repay the loan amount you want to borrow.
We’ll package your application to reduce that risk. We’ll show what you’re really worth, as we do with stand-alone limited company contractors. By removing the unnecessary, we help them see the wood from the trees.
The majority of High Street lenders won’t be able to offer that service. They’ll send your payslip with your application to head office. They’ll then leave the underwriter to try to work out what you can afford.
You deserve so much more. As an umbrella contractor, a mortgage broker who gets contracting is your best—and often only—bet.
John Yerou is a pioneer of contractor mortgages and owner and founder of Freelancer Financials, Contractor Mortgages®, C&F Mortgages and Self Employed Mortgages, trading styles and brands of the award-winning Mortgage Quest Ltd.
Posted by John Yerou
on July 8th, 2015 09:45am in