IT Contractor Mortgage

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Are there specific mortgages for IT Contractors?

The IT industry, particularly in the UK, employs many workers as Contractors. Despite this fact, mortgages are rarely career-specific, and therefore whether you’re an IT Contractor or any other form of Contractor, there won’t be a single specific mortgage product that you will need to apply for.

Although IT Contract roles in particular are typically highly paid, as calculating a stable income pattern can be a more difficult task for lenders due to increased potential for income fluctuation, not all lenders are open to applications from Contractors. You may find that high street banks are less receptive to your application than they are of those from employed people, however, there are specialist lenders who are more open to Contractor applicants.

If you offer your IT Contractor services independently as a Sole Trader, as Limited Company Director or under an Umbrella Company, there are Mortgage Lenders who will accept your application. How you are paid will also affect availability of mortgage options.

How will my income be assessed?

As IT Contractors trade in and are therefore paid in a number of ways, your income assessment will vary based on how you are paid. Your credit score is also likely to be an important factor in the lenders’ considerations.

Self-Employed Sole Trader or Limited Company Director

Both Sole Traders and Limited Company directors are typically assessed in accord with their average annual income, although some lenders will consider your total net profits if you trade as a Limited Company Director. This may mean you can take advantage of higher borrowing from these lenders.

Day rate Contractor

Lenders will typically treat you similarly to a traditionally employed applicant. They will establish a salary for you using an annualised version of your daily rate.

Umbrella Company Contractor

It’s fairly common for IT Contractors working within the public sector to be paid through an Umbrella Company. In this case, lenders typically assess your annual income from your Umbrella Company payslips, which they will calculate similarly to a full time salary.  

How do I Prove My Income/What Documents Will I Need?

Whenever you apply for a mortgage, the proof of income required will be relevant to your employment type. Lender criterias also vary, and therefore, some may additionally ask for  proof of a qualification or significant experience in your chosen industry, particularly if you are a fairly new Contractor.

Self-Employed Sole Trader or Limited Company Director

In order to prove your average annual income, typically you need to provide certified accounts and HMRC tax year overviews as proof of income. For lenders who are looking at Limited Company Director net company profits, business bank statements are also likely to be required.

Day rate Contractor

Day rate Contractors need to provide proof of their current contract rate. Typically your contract will need to have at least six months remaining on application and be able to prove that your income is generally sustainable.

Umbrella Company Contractor

A typical requirement is three to six months worth of Umbrella Company payslips. It’s worth noting that if you receive a statutory payment from your Umbrella Company, and bonuses or commission payments are made separately, outside of the payslip, this will not be considered as part of your income for the purposes of your mortgage application.

Speak To An Expert

Total Home Loans are a national mortgage broker with whole of market access. Their combined experience of over 50 years in the mortgage and financial services industry means they have an enviable reputation and one which makes them well-placed to find the most suitable mortgage solution for you.

How Much Can I Borrow as a Contractor?

Regardless of your employment type or trading style, Lenders use a multiple of your approved annual income, defined during their assessment. This multiple varies based on your circumstances, including your credit score and job stability. Different lenders also offer slightly more or less, however, it typically ranges between three and five times your approved annual income. If you are a high earner, some lenders may be willing to extend their borrowing to six times your income.

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How Can a Mortgage Broker Help?

If you are working as a contractor in the field of IT, securing a mortgage can be slightly more complex than it is for the average applicant, however, approaching the most appropriate lender can go a long way towards easing the process. 

Here at Total Home Loans we can find a lender from our large pool of specialist lenders, who will look at your income and trading style more favourably, in order to achieve maximum borrowing potential. A short assessment can help us to identify those lenders who’s criteria most closely match your circumstances, saving you time, money and frustration.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Kevin Franklin

May 31, 2022

Stars

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May 16, 2022

Stars

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May 16, 2022

Stars

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May 5, 2022

Stars

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May 4, 2022

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