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IT Contractor Mortgage – a guide
IT Contractors are seen as great customers by most mortgage lenders because you’re likely to have lots of contracts to choose from. Finding the right mortgage, then, is mainly about finding a lender and a product that meet your needs.
Are there specific mortgages for IT contractors?
IT Contractors generally find it fairly easy to get a mortgage, even though no products are aimed purely at this audience.
Lenders today are increasingly understanding of life as a contractor and some may offer you a higher loan amount and better rates than a standard self-employed worker.
How will my income be assessed?
Mortgage lenders have to confirm that your mortgage will be affordable. This is why they want to understand your annual income and to a certain extent, your spending.
There are many ways that lenders might assess contractor income but having company accounts and tax calculations ready will improve your experience of the mortgage application process.
Lenders have different requirements with regards how many years’ records you will need to provide. Some contractor-friendly specialist lenders may base the mortgage on your daily rate rather than past business performance.
What documents will I need?
The documents lenders ask for will often depend on your business set-up:
Sole trader: You usually need to supply self-assessment records. Lenders often ask for two to three years’ details but some accept the latest tax year.
Limited Company: Two to three years’ certified accounts are the standard, but some lenders accept less. If you take a low salary from the business for tax reasons, it can help to find a lender that assesses you on retained profit as well as salary and dividends, otherwise your borrowing potential could be limited.
Contractor: Some lenders understand what working as a contractor is like and accept your day rate as the basis for their income calculations. They will ask for evidence of contracts, often going back two years. Some lenders will need you to have at least six months remaining on your current contract.
Umbrella company: If you work through an umbrella company, lenders will ask about your working history. It helps if the umbrella company has renewed your contract at least once.
How much can I borrow as a contractor?
The standard rule of thumb for mortgages is that you can usually borrow four to five times your annual income. That’s why it’s so important that the lender recognises your full earnings.
If you want to borrow more than five times your salary, taking out a joint mortgage with a partner or family member should increase the amount Lenders are willing to offer. Lenders base the total loan amount for a joint mortgage on your combined incomes, which should mean a higher mortgage total.
Bear in mind that the more you borrow, the higher your monthly mortgage repayments will be. Putting down a larger deposit reduces the monthly cost and will unlock lower interest rates from lenders.
How can a Mortgage Broker help?
Working with a Mortgage Broker could help you quickly narrow down the options to find the most suitable mortgage products and lenders – potentially seeking out those that will accept your contract rate as your income.
We will spend time getting to know you and your contracting business, as well as your property goals.
We then compare dozens of lenders and products that will most closely match your requirements to secure a mortgage.
Once you have made an informed decision, we support you in applying for the mortgage, providing the documentation required and chasing up all the parties involved.
We are fully authorised and regulated by the Financial Conduct Authority, so get in touch today to explore how we can find you a good value IT contractor mortgage.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE