How to Calculate Contractors Earnings for Mortgage
To calculate a contractor's earnings for a mortgage, start with the day rate on your current contract and multiply it by the days you work each week and the weeks you work each year. That gives the annualised figure most day-rate lenders use. For example, £400 a day, four days a week, 46 weeks a year gives £73,600.
If the lender uses accounts instead, the figure comes from your tax returns: net profit for a sole trader, or salary plus dividends for a company director, usually averaged over two years. In that case your most recent filed accounts matter more than your current contract rate, so a strong new contract may not help until it appears in your accounts.
Whichever route you take, document it. Keep contracts, extensions, invoices and bank statements organised, and be ready to explain gaps between contracts. Lenders are far more comfortable with a contractor who can show continuous work, even across several clients, than one with unexplained breaks.
- Day-rate route: day rate × days × weeks = annualised earnings.
- Accounts route: tax-return income, usually averaged over two years.
- Keep contracts, invoices and statements organised to evidence the figure.
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