Can I get a mortgage working via an umbrella company?

A good way to begin to answer this question is to pose some questions that a lender is likely to ask. For example...Who employs you? Can you explain the route your income takes before it ends up in your bank account? Why do your payslips not look like an employee’s payslips? Why do the credits in your bank account have different names to the umbrella company?

The plot thickens doesn’t it? The questions posed above are symptomatic of an application that is about to fail. It means the bank has failed to grasp that the borrower is a professional contractor utilising a payroll service as a tax efficiency vehicle. What we need to understand is how we go about avoiding these questions in order to successfully obtain a mortgage offer.

Ensure your application is assessed correctly

The first step is to shift focus away from the invoicing mechanism, and onto the key points where the risk assessment should be focused.

These are:

  1. The gross contract earnings of the contractor
  2. The skills and experience of the contractor in their chosen profession.

If the underwriter can grasp these points and understand that the umbrella service is simply a means to an end, there should be no issue with a successful mortgage offer.

Easy isn’t it? If you’re a contractor walking into a bank, no it isn’t! Banks have their prescribed ways of assessing income, and they will try to squeeze the umbrella contractor into the “employed” pigeon-hole. Hence the request for payslips and a detailed breakdown of tax paid. The fundamental answer lies in utilising a professional who can go to the right lender, and the right underwriter within that lender, to explain that contract value and experience should negate any perception of risk with an invoicing mechanism. 

With current umbrella offerings for contractors, it can be complicated when a contractor tries to balance various factors that determine the right umbrella service to opt for. There’s IR35 compliance, tax efficiency, simple administration, regular payments, and even the acceptance of your end client with the umbrella you may want to use. What can help in this decision is the knowledge that a competitive mortgage offer is still realistic.

If the correct route to the mortgage offer is chosen correctly by the umbrella contractor, the computer won’t necessarily say “no”.