Today we’re going to talk about zero hour contracts. Specifically, how those on such contracts are able to get approved for a mortgage. As we all know, getting a mortgage is a challenge in itself. Let alone if you’ve not got a proper employment contract with a fixed wage being paid into your bank account regularly. Even for those who have been in consistent employment for the past 10 years, getting on a property ladder is no easy feat – so what chance do those working day to day, week to week or month to month on zero hour contracts stand? Well fortunately, there is help at hand which I’ll explain below but first, let’s run through what a zero hour contract actually is as I’m sure you’ve all heard it mentioned in the news over the past few years. So I’ll give my take on it.
Zero Hour Contracts
Some might get confused and think zero hours means working zero hours and whilst that would be nice, most of us do need to work to get paid.
No, a zero hour contract is where you work for a company (or person) but are not guaranteed a fixed amount of hours. For example, if you were to take a traditional 9-5 job, you’d work 8 hours a day, 5 days a week, 160 hours a month ongoing, month in month out. With a zero hour contract, you effectively work as and when you’re required.
Now most do a full 40 hour week and more. The only difference is that the work is not “guaranteed” as such meaning the following week you might be told no work is available or you might be called into work at 6am on a Monday and be told to go home at 9am. So in short, no fixed hours and because of this, it also means your income isn’t fixed. It’s extremely variable which means determining your ability to pay back credit or even award it in the first place is a challenge for all lenders. Especially when we’re talking about a mortgage.
As mentioned above, getting a traditional mortgage is tough. Especially if you want 95%+ which most first time buyers do. Whether you’re considering a fixed rate or interest only option, the hurdles and hoops you will need to jump through are plentiful and unfortunately for those who don’t have a permanent employment contract the hurdles are significantly higher than for those who do.
Now I’m sure you all know someone who works on a zero hour contract and you’ll no doubt agree that they work as hard as anyone else; as many hours as everyone else, and complete a full working week just the same as the regularly employed folk – so why shouldn’t they be afforded the right to get a foot on the ladder like everyone else? Well – now they can, by way of –
Zero Hour Contract Mortgages
Obviously a traditional mortgage is going to be tough to obtain if you don’t have a deposit saved, permanent employment, a good credit rating and years of whiter than white financial activity. But as previously mentioned, there are options available and one such option comes by way of the zero hour contract mortgage being offered by the Ipswich Building Society.
As the name suggests, this new mortgage product is specifically aimed at those who are on zero hour contracts and who would like to get their foot on the property ladder.
Let’s be honest, in the real world the people working on zero hour contracts are doing the same if not more in terms of working hours than those in regular full time, contracted employment. So in terms of affordability it’s completely understandable that a product like this is an option.
Fortunately, firms like the Ipswich Building Society exist and I think it’s extremely forward thinking to launch a product like this, especially in the UK with more and more people opting to work on zero hour contract arrangements ongoing.
Typically, like all businesses, the market dictates and like with all products and services, if you have a group of people in need of said product or service you’ll be able to find someone offering it. IBS have acted on this and thousands of zero hour contract workers across the UK will be glad of it.
So as you can see, there are options available to you if you are a zero hour contract worker. It’s not all doom and gloom and whilst traditional lenders and mortgage brokers do favour those who are employed permanently, there is light at the end of the tunnel for those who are not.
IBS advise you keep 18 months’ record of your work history and P60s, and three months of payslips to show evidence of consistent earnings. And speak to a specialist mortgage adviser who will be familiar with your circumstances.
In truth, with over 900,000 people currently working under a zero hour contract relationship in the United Kingdom alone, it’s simply too large of a market sector to disregard and thankfully firms like IBS are leading the way.