What Is An Umbrella Company?

An umbrella company is a company that hire agency contractors who work on assignments but only work on temporary contracts. The agencies are usually found through recruitment companies. Umbrella companies have become a staple for contractors who don’t want to endure the stress of constantly having to chase invoices, or maintaining payrolls. Since the changes to the IR35, which means that being a Ltd company in the public sector is no longer acceptable, Umbrella companies have also become vital payment routes for those who work on a temporary basis. 

What Is An Umbrella Company Mortgage? 

This type of mortgage is a mortgage which is specifically targeted toward those who work through umbrella companies and can be classed as agency workers, or contractors. 

Every lender has their own ‘criteria’ – their guide on what income they will accept – and therefore how they will calculate your potential mortgage amount. The income can sometimes be complex, due to how the umbrella company pays you. For example, we’ve had clients with basic rate pay, and then additional allowable pay which tops up the income. Often lenders may not take that into consideration, but luckily here at Right Mortgage UK we have experience in this area and have helped many people who are paid through an umbrella company, to get a mortgage. 

Some contractors or agency workers can be paid the mandatory minimum wage, but then also receive bonuses or commissions based on the work that they do. Most lenders prefer to lend to those who receive a high rate of basic pay than have to deal with the multiple streams of income, which are not always guaranteed. When it comes to looking for a mortgage, it would be in your best interest to find a lender who can take all of the different streams of income into account. 

Benefits Of An Umbrella Company Mortgage 

Mortgage Based On Contract Value 

When seeking an umbrella company mortgage, every lender is different in their approach to your income and contracts.  Some will look at the value of the contract that you are currently involved in, whereas others will use your payslips.  When working from a contract, it needs to be finalised and signed by all parties, and the pay you have received so far is correct against the contract. They will also require you to have been in the contract for a set amount of time. This could be 12 months, but could also go down to as low as 6 months.  If it’s your first contract, but you have history in the same industry, there are potentially options for you too.

Regular proof of income

Typically, those contractors who run their own business accounts don’t have proof of income until they do their end-of-year tax reports. When you work for an umbrella company, you receive monthly or weekly remittance slips. These are able to be used in place of payslips to show lenders your history of earnings. 

New contractors

One of the benefits of looking for a mortgage when you are new in the role, working for an umbrella company, is that lenders will often consider your mortgage, even if you only have 3-6 months worth of proof of income. Of course it depends on your experience in that type of role or industry, but definitely worth speaking to us about.  This is a big contrast to those who are self-employed, as lenders require at least 12 months of proof of income, with some lenders requesting up to 3 years’ worth. 

Higher borrowing amounts 

Those who are self-employed often have a larger amount of expenses when it comes to the end of the year. Your net profit could end up being less than the gross pay from the umbrella company. This means that mortgage lenders may consider offering you a larger maximum affordable mortgage compared to those that are self-employed. 

Drawbacks Of An Umbrella Company Mortgage 

The biggest drawback when it comes to an umbrella company mortgage is the fact that you need to find the right lender who will take into account the different streams of income that you receive. As well as this, certain lenders will not offer you a mortgage if you work for an umbrella company, as well as multiple other firms at the same time. In this scenario, they could treat you as self-employed.

Here at Right Mortgage UK, we can help you to find a specialist lender who will consider all of your needs and help you to find the best mortgage for you.