IT Contractor

IT Contractor Mortgage – exploring the options

IT Contractors are seen as great potential customers by many Mortgage Lenders, because you tend to earn well and are in good demand for work. We can help you compare all the options to make sure you get the right deal for your situation.

Are there specific mortgages for IT Contractors?

Working as a Contractor usually means you can access a wide range of mortgage products, so there’s no need for lenders to provide special options for you or other self-employed workers.

What can vary is how the lender will see you: some are more accepting of Contractors than others, and may offer you higher loan amounts and better rates. They may also be more flexible in how they assess affordability.

How will my income be assessed?

Assessing affordability is a fundamental step for lenders, to ensure you can repay the loan within your budget. 

There are various ways that lenders assess Contractor income, but you will usually need to supply various documents to prove your earnings. These might include company accounts, tax calculations and contract details. 

High street banks often look at your annual income over the past couple of years. But some specialist lenders might instead base the mortgage loan on your daily rate and length of current contract. 

The lender you choose can make a considerable difference in how much you can borrow. Some lenders will take your average income over the past few years, while others will simply look at the last 12 months. If your most recent year was less profitable than others, specialist brokers like us would find a lender that will look at current and future business rather than past performance.

What documents will I need?

Lenders require proof of income as part of the mortgage application process. What they ask for may depend on your business structure:

Sole Trader: Self-assessment records for the past two to three years. Some accept a single year’s details.

Limited Company: Up to three years’ certified accounts. Some lenders will base your income on your salary and dividends, rather than retained profits, which might limit your borrowing potential.

Contractor: Some lenders accept your day rate as your income, calculated with you working full time, 48 weeks of the year. You will need to provide proof of contracts, going back up to two years. Some lenders require there to be at least six months left on your current contract.

Umbrella Company: Details of your working history with the umbrella firm. It helps if the company has renewed your contract at least once.

How much can I borrow as a Contractor?

A basic rule of thumb is that you can usually borrow up to five times your salary, but as we have seen, the loan amount can vary a lot for an IT Contractor depending on the lender.  

If you are aiming for a high loan amount, you might choose a joint mortgage with a partner or family member, as this is calculated on both your incomes combined. 

Higher loan amounts will of course mean higher monthly mortgage repayments. Putting down a larger deposit can get you lower interest rates from lenders to reduce the payments a little. 

How can a Mortgage Broker help?

The team at The Mortgage Centre is here to explore all your options. We’ll spend time with you to understand your business, your personal circumstances and property goals to recommend the most effective mortgage products and lenders.

We will look at lenders who will accept your contract rate as your income, comparing their offers across the market. We’ll then help apply for a mortgage and supply all the documents you need.

We are fully authorised and regulated by the Financial Conduct Authority, so get in touch today to explore how to secure a mortgage that works for you. 

Your property may be repossessed if you fail to keep up the repayments on your mortgage.