Remortgage on a Zero Hours Contract

Understanding Zero Hours Contracts and Mortgages

A zero hours contract is an employment agreement where the employer is not obliged to provide any minimum number of working hours and the worker is not obliged to accept any work offered. This flexibility can be beneficial for many workers, but it creates uncertainty around income that mortgage lenders find difficult to assess.

The fundamental challenge is that lenders need to be confident you can afford your mortgage payments every month. With a permanent job and a fixed salary, this is straightforward to assess. With a zero hours contract, your income may vary significantly from one month to the next, making it harder for lenders to determine a reliable income figure.

However, the mortgage industry has evolved considerably in its approach to zero hours contracts. While some high street lenders still decline applications from zero hours workers automatically, many others have developed specific criteria for assessing this type of income. The key is finding the right lender for your situation.

Several factors will influence how lenders view your application:

• Length of time on a zero hours contract - A longer track record of consistent work demonstrates reliability
• Consistency of hours and income - Regular hours and stable earnings are far more important than the contract type itself
• Industry and employer - Some industries and employers are viewed more favourably by lenders
• Your overall financial profile - Credit score, equity position and other debts all play a role

It is also worth understanding that some workers who believe they are on zero hours contracts may actually have different contractual arrangements that lenders find more acceptable. Checking the exact terms of your contract with your employer can sometimes reveal that your position is stronger than you think.

Which Lenders Accept Zero Hours Contracts?

The lending landscape for zero hours contract workers varies significantly between providers. Understanding which types of lenders are most likely to accept your application can save time and avoid unnecessary credit searches.

High street lenders. Some major high street banks and building societies will consider zero hours contract workers, though their criteria tend to be stricter. They typically require a longer track record and more consistent income evidence. A few still have blanket policies against zero hours contracts, though this is becoming less common.

Building societies. Many building societies have a more flexible approach to non-standard employment, including zero hours contracts. They often take a more individual approach to applications and may be willing to consider your circumstances in detail rather than applying rigid rules.

Specialist lenders. There are lenders who specifically cater to borrowers with non-standard income, including zero hours workers. These lenders understand the nuances of variable income and have developed assessment methods that work for contract and casual workers.

Your existing lender. If you are already a mortgage customer, your current lender may be more accommodating than a new one. Product transfers in particular can be a viable route, as they often involve fewer affordability checks than a full remortgage application.

The lending market changes frequently, with lenders regularly updating their criteria. What one lender refused six months ago, they may now accept. This is one of the strongest arguments for using a mortgage broker who keeps up to date with the latest lending criteria across the entire market.

A whole-of-market broker authorised and regulated by the FCA will know which lenders currently accept zero hours contracts and which ones offer the best terms for your specific circumstances. They can also make an initial assessment without leaving a mark on your credit file.

How to Prove Your Income on a Zero Hours Contract

The most critical part of a zero hours contract remortgage application is demonstrating that your income is reliable enough to sustain your mortgage payments. Lenders will want substantial evidence, and the more you can provide, the stronger your application will be.

Bank statements. These are arguably the most important documents for zero hours workers. Lenders will typically want to see six to twelve months of bank statements showing regular salary credits. Consistent deposits of similar amounts each month paint a picture of reliable income, even without guaranteed hours.

Payslips. Provide as many payslips as you can, ideally covering at least six months but preferably twelve. Even though your hours may vary, consistent payslips demonstrate ongoing employment and regular earnings.

P60 and P45 documents. Your P60 shows your total earnings for the tax year and is a powerful document for proving your annual income. If you have P60s from multiple years showing consistent or growing earnings, this significantly strengthens your case.

Employer reference letter. Ask your employer to provide a letter confirming your employment status, average weekly hours, typical earnings and how long you have worked for them. Some employers will also confirm the regularity of work offered, which can reassure lenders.

Tax returns. If you have filed self-assessment tax returns (which some zero hours workers do if they have additional income sources), these provide a comprehensive picture of your annual earnings.

When preparing your evidence, aim to present your income in the most positive but honest light. If your income has been growing over time, make sure this trend is visible in your documentation. If there are any months with significantly lower earnings, be prepared to explain why, as lenders may ask about anomalies.

Some lenders calculate your income for affordability purposes by averaging your earnings over six to twelve months. Others may take a more conservative approach and use your lowest monthly earnings as the benchmark. Understanding how different lenders approach this calculation can help you and your broker target the most favourable options.

Improving Your Chances of Approval

Given the additional scrutiny that zero hours contract applications receive, taking steps to strengthen every other aspect of your financial profile is essential. Here are the most effective strategies.

Maintain consistent employment. The longer you have been working regularly for the same employer or in the same role, the better. If you have been on a zero hours contract for two or more years with consistent hours and earnings, many lenders will treat your income as reliable. Avoid changing employers immediately before applying if possible.

Build a strong savings record. Having savings in reserve demonstrates financial responsibility and provides reassurance that you can cover your mortgage payments during any quieter periods. Some lenders may specifically want to see evidence of savings as a buffer.

Maximise your equity. A lower LTV ratio reduces the lender's risk and opens up more options. If your property has increased in value or you have made overpayments on your mortgage, your equity position may be stronger than you realise.

Minimise other debts. Pay down credit cards, personal loans and other debts before applying. Lenders look at your overall debt-to-income ratio, and reducing your committed monthly outgoings increases your disposable income and the amount you can borrow.

Maintain a perfect payment record. Ensure all your financial commitments are paid on time in the months leading up to your application. Even a single late payment on a credit card or utility bill can raise concerns when your employment status is already under additional scrutiny.

Keep detailed records. Create a personal record of your hours worked, earnings received and contracts fulfilled. This additional documentation can help support your application and answer any questions lenders may have about your work pattern.

Apply with a partner. If you have a partner with more traditional employment, applying jointly can significantly strengthen your application. The partner's stable income provides reassurance to the lender, and your zero hours income can supplement their earnings.

Product Transfers and Alternative Options

If a full remortgage with a new lender proves difficult, there are alternative routes that may be more accessible for zero hours contract workers.

Product transfer. As mentioned earlier, staying with your current lender and switching to a new deal is often the path of least resistance. Many lenders carry out a more streamlined assessment for existing customers, particularly if you are not borrowing more. While you may not get the absolute best rate on the market, you could still save significantly compared to reverting to an SVR.

Further advance. If you need additional borrowing, a further advance from your existing lender adds a new loan on top of your current mortgage. This can sometimes be arranged with less rigorous checks than a full remortgage, though the rate may be different from your main mortgage.

Secured loan. A second charge mortgage allows you to borrow against your property without disturbing your existing mortgage. This can be useful if you have a competitive rate that you do not want to lose. Secured loan providers sometimes have more flexible criteria for non-standard income.

Waiting and building evidence. If your options are currently limited, spending six to twelve months building up a stronger track record of consistent earnings can dramatically improve your chances. Use this time to save, pay down debts and maintain a perfect payment record.

Whichever route you choose, always seek advice from a qualified mortgage adviser before making decisions. They can assess all your options and recommend the most suitable approach for your circumstances. All mortgage advice should come from a firm authorised and regulated by the Financial Conduct Authority.

It is also worth reviewing your situation periodically, as the lending market changes regularly. A lender that could not help you six months ago may have updated their criteria and could now be a viable option.

Your Rights as a Zero Hours Contract Worker

Understanding your employment rights can be important not only for your general wellbeing but also for your mortgage application. Zero hours contract workers have more rights than many people realise, and these protections can be relevant when discussing your situation with lenders.

Employment status. Most zero hours contract workers are classified as workers rather than employees, which gives them certain statutory rights. These include the right to the National Minimum Wage, paid annual leave, rest breaks and protection from discrimination. Some zero hours workers may actually be employees, which provides additional protections.

Exclusivity clauses. Since 2015, exclusivity clauses in zero hours contracts have been banned. This means your employer cannot prevent you from working for other employers, which gives you the flexibility to earn additional income if needed.

Continuity of employment. If you have been working regularly for the same employer, you may have built up continuity of employment even on a zero hours contract. This can be relevant to your rights regarding redundancy pay, unfair dismissal protection and other employment benefits.

Holiday pay. Zero hours contract workers are entitled to paid holiday, calculated as a percentage of hours worked. This is important because it means your total annual earnings, including holiday pay, can be used to demonstrate your income to lenders.

Auto-enrolment pension. If you earn above the threshold, your employer must enrol you in a workplace pension scheme. Being enrolled in a pension can demonstrate the regularity and level of your earnings to a lender.

When applying for a remortgage, highlighting these protections and the stability they provide can help counter any perception that zero hours work is inherently insecure. Your adviser can help you present your employment situation in context, emphasising the practical reality of your working arrangement rather than the theoretical uncertainty of the contract type.