IT Contractor Mortgage
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As an IT Contractor you’re likely to be highly employable and always in demand. That spells good news if you’re looking for a contractor mortgage, as lenders seek reliable income and long contracts from their clients.
Are there specific mortgages for IT contractors?
There are certainly plenty of opportunities for IT Contractors to get a mortgage, even though there are no products purely aimed at the IT discipline.
Lenders are generally very welcoming of all Self-Employed workers as long as you have the required documents to confirm your income.
How will my income be assessed?
The main priority for a Mortgage Lender is to confirm that the mortgage will be affordable for you. As part of this they will want to understand your typical annual income and your outgoings.
Each lender may take a different approach to how they assess contractor income. You will always have to supply company and tax documents as part of the mortgage application process, but the number of years’ records and the specific details will vary. Some contractor-friendly specialist lenders will base the mortgage on your daily rate rather than business records.
What documents will I need?
The documents that lenders require often depend on the way your business is set up:
Sole trader: you will usually supply tax calculations via your self-assessment records. Lenders often ask for two to three years’ details, but some will accept just the latest tax year.
Limited Company: the norm is for lenders to request two to three years’ certified accounts, but again some lenders accept less. If you pay yourself a nominal salary for tax reasons, it is helpful to find a lender that accepts net profit retained in your business on top of salary and dividends. Otherwise you may find that your borrowing potential becomes limited.
Contractor: Some lenders are very understanding of what working as a contractor is like, and will accept your day rate as the basis for their income calculations. You will need to provide evidence of contracts, often going back two years, and lenders sometimes want you to have at least six months left on your current contract.
Umbrella company: If you work through an umbrella company, lenders will ask about your working history. It helps if you’ve had your contract renewed with the umbrella company.
How much can I borrow as a contractor?
Mortgage Lenders usually offer an applicant four to five times their annual income – which is why it’s so important to make sure that the lender recognises your full earnings.
If you want to borrow a larger amount, you could potentially explore a joint mortgage with a partner or family member. With joint mortgages, lenders base the total loan amount on your combined incomes, which should mean you gain a higher mortgage total.
It’s important to remember that the more you borrow, the higher your monthly mortgage repayments will be. Saving up a larger deposit will reduce the monthly cost and give you access to lower interest rates.
How can a Mortgage Broker help?
There are a lot of variables to consider when you’re looking for a contractor mortgage – but a Mortgage Broker can make the process both simpler and more thorough.
We will look at your specific circumstances to decide which lenders and products will suit you best, and then compare the different options for you to secure a mortgage.
It may be that a lender who accepts your contract rate rather than taxable income will be the right choice. Once you have made an informed decision, we support you in applying for the mortgage and at every step until the purchase is complete.
Purely Financial Planning Ltd is an appointed representative of PRIMIS Mortgage Network, a trading name of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority.
Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.