IT Contractor Mortgage

Are there specialist mortgages for IT contractors?

There’s not a specific lender or mortgage just for IT contractors. The difference between a mortgage for an employed individual and one for a contractor is how each lender assesses the income. 

As an example, we had a client who was an IT contractor working in a company in Leeds who had significant issues trying to secure a mortgage. He’d been to a couple of brokers and his own bank with no success. We had a long chat and in his particular case it was down to his track record. He’d only had ten months in the IT industry as a contractor, and many lenders look for more longevity than that.

The one we ended up looking at needed 12 months. So it wasn’t the case not getting a mortgage, we just booked an appointment for a couple of months later.. As soon as he’d hit the 12 month mark I had a number of lenders lined up and everything was fine. 

I ended up assisting more than 12 of his colleagues with mortgages because they’d experienced similar issues. The company employed a lot of contractors and many hadn’t been with the business for a long period.

How do you prove your income as an IT contractor?

The IT contractors I’ve raised mortgages for recently tend to be on a day rate. To prove your income, we need a copy of the contract which states the rate, then we would multiply that day rate by five to get a weekly figure. Lenders then take that rate over 46 or 48 weeks, allowing for holiday and sickness. 

Many lenders would also require your payslips or remittance advice. You normally need a copy of the contract – even if you’ve been doing it for years, it’s always beneficial to provide paperwork. Some lenders like a good track record within the industry. So keep all your contracts somewhere safe because there’s a possibility that the lender may require them. 

That’s a standard way of doing it when you’re on a day rate. Some IT contractors have a Limited Company and in most cases I use the same process in assessing the income. As a Limited Company director you would normally need at least one year’s accounts and with many lenders it’s two years. Again, it varies from client to client, lender to lender and contract to contract.

What if I have a Limited Company, how does it work?

It doesn’t make an awful lot of difference – it’s more a case of how you assess your tax liability. In most cases I would ask for the same information. You would need at least one year of operation, and then I would be looking at the contract and your remittance advice to get your day rate.

What do lenders look for in an IT contractor?

It’s how long you have been in the industry; how long you’ve got left on your fixed term contract and whether it’s likely to be renewed. Obviously the amount you’re earning determines how much they are willing to offer.. 

With all contract workers, the amount one lender will lend can differ enormously to another.

So it’s always worth looking beyond your own bank or building society. And that’s where a whole-of-market mortgage broker comes into play. We can access a lot of different lenders who all assess income slightly differently and all have slightly higher or lower income multipliers.

How can a mortgage broker help if you are an IT contractor?

A mortgage broker can help significantly because the difference between one lender to another can be vast. It’s all down to how long you’ve been in the industry, how long you’ve got on your contract and how long you’ve been a fixed term IT contractor. 

If it is a fixed term, which the majority are, we would need to see that original contract. Some lenders have minimum incomes, typically £50,000 per year. A whole-of-market mortgage broker will have access to many different lenders with different ways of assessing your income and how much you can borrow. 

Your home may be repossessed if you do not keep up with your mortgage repayments.