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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 11th June 2020*

If you’re an IT contractor looking for a mortgage and wondering what you need to do for the best chance of securing a great rate, you’re in the right place.

This guide will explain all of the ins and outs of how to go about getting a mortgage, what lenders will look for in your application and give you tips about what you can do to help improve your chances of getting a mortgage which ticks all your boxes.

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How easy is it to get a mortgage as an IT contractor?

These days it’s easier to get a mortgage when you’re a self-employed IT contractor than it once was. Many mortgage providers have, in recent years, relaxed their lending rules to help people in less standard employment meet affordability and eligibility criteria. The key to getting the best deal is finding the right contractor-friendly lender.

Some mortgage providers have lending criteria which will aid you more than others. Knowing which lender will judge your income and mortgage application most fairly will go a long way towards helping you secure lending you’re happy with.

The easiest way to secure a mortgage on competitive terms is through a specialist broker used to arranging mortgages for borrowers who are self-employed contractors. They will know which lenders have the best lending criteria and eligibility rules to ensure your application gets the green light.

Get in touch and we’ll match you with an expert who can help you.

Are there specialist mortgages for contractors?

Yes, some lenders offer mortgage products specifically tailored to contractors, some even offer specific products tailored to suit certain professions – such as IT professionals. Lenders who cater to contractors will assess how much you can borrow based purely on your contract rate, so if you have a daily or weekly rate, this is taken into account and calculated fairly.

As long as your credit rating is in good shape and you don’t pose any particular risk, you should find you can borrow money at the same sort of interest rates as a PAYE employee could get.

How do I get one?

Getting a mortgage when you’re an IT contractor may be slightly more tricky than if you were on a permanent employment contract and a PAYE earner, but there are steps you can take to make sure you get the right mortgage at the best available rate…

  • Provide as much evidence of earnings as you can; bank statements, tax returns and invoices will all help prove how much you are earning and will help a mortgage lender ascertain your affordability and eligibility with more certainty
  • If you trade as a limited company, you’ll need your full business accounts and financial statements
  • Provide complete evidence of your current and previous contracts; certificates for IT qualifications and examples of previous experience can also help bolster your position
  • Where necessary, strengthen your credit report before you apply; pay off any outstanding debts you can afford to settle and, if you are able, curb your spending in the three months prior to applying for your mortgage
  • Save for a higher deposit; the more deposit you have available, the better the odds of getting more favourable rates because the number of lenders you can approach will widen
  • Don’t go it alone; getting a joint mortgage or applying with a guarantor can help you get the mortgage you want as you are offsetting the risk to the lender
  • Find a mortgage broker who knows which lenders specialises in mortgages for IT contractors; an expert broker can save you time, hassle and, potentially, money – not just in the short term but over the entire course of your mortgage.

Get in touch and we’ll introduce you to one of the experts we work with. All the brokers we work with are whole-of-market experts with access to mortgage lenders across the entire UK. They will help you find the right lender and work with you to prepare your application and supporting documents to ensure you get the best rates available.

What if I have a limited company?

If you’re an IT contractor with a limited company set up, most lenders will assess your application under different criteria. When assessing a company for mortgage lending, most providers will only take salary and dividends into account when calculating how much you can afford to borrow, rather than your total earnings.

If your company is profitable but you’re taking a low salary, you may be better off to look for a lender who will look at your full book of accounts when assessing your affordability.

You will need to take care to make a clear distinction between money you hold and money held by your company when presenting your bank statements and financial records.

Any funds you might have set aside to cover costs such as taxes or VAT won’t generally be counted towards assets you hold.

What documents will I require to make my application?

Nowadays, many lenders are a lot more aware of the less traditional working methods and will simply require some form of photo ID, your proof of address, a copy of your current contract and three months of bank statements.

If, however, you are applying with a less forward-thinking lender, you may require additional paperwork, including:

  • Photo ID – Your driving license or passport
  • Proof of Address – A council tax bill, utility bill or bank statement
  • Limited company accounts – If you’re a director of a limited company you’ll require two years’ worth of accounts, although some lenders will accept just one year’s accounts
  • Personal tax returns – Three years SA302s and a tax overview from HMRC is ideal but if you have only been contracting on a self-employed basis for a year, you may be able to find a lender willing to accept only one year’s SA302
  • Signed contracts for the last 12 months – These should show your start date, the rate you have been paid and the expiry date, rolling contracts are also acceptable
  • Bank statements – These can be downloaded versions, but should cover the last three months of salary. You will also need to evidence business bank statements
  • Proof of deposit – A statement for your savings or investment account. If your deposit is a gift, you’ll need a signed letter from your family member stating that they have the funds or that they have transferred the funds to you already
  • Life insurance or other protection policies – if you have life cover or income protection insurance, some lenders want to see evidence of this, a copy of the policy summary should suffice

An expert broker will be able to help you prepare a strong application and advise you on the best documentation for the lender you are applying with. If you would like to speak to one of the experts we work with, get in touch for a free, no-obligation chat.

What kind of rates will I be able to get?

The rates you can get as an IT contractor will depend on the mortgage provider you go to and how much of a risk lending to you might pose. The things which will determine the rate you end up on will include:

  • Your credit rating – if you have bad credit, you may still be able to qualify for a mortgage but the rates you can get will be higher to help the lender offset their risk
  • How much deposit you have – the larger your deposit the less money you will need to borrow, which will help you to decrease the potential risk the lender has by approving your application
  • Your financial records – three years of business account records will go a long way to securing the best available rates. While you can get a mortgage with fewer than three years, the rates you will be offered will be tempered by the accounts you can show to back up your affordability

As mentioned above, if your credit rating is strong, you have the business accounts and a good deposit, you should find it possible to secure rates as good as an employed borrower would be able to get.

One way to make sure you get the best available rates is by using a specialist broker. We work with expert brokers who are used to arranging mortgages for IT contractors, get in touch and we’ll introduce you to one so you can have a free, no-obligation chat about your options.

Who are the best lenders to go to?

The best lender for you will come down to which one has the most suitable lending criteria for your own set of circumstances. A lender whose eligibility and affordability assessments will view your earnings in the most favourable light will help make sure you get the best rates available to you.

The Halifax Bank, for example, is a popular lender for IT contractors…

Halifax mortgage for IT contractors

The Halifax Bank was one of the first lenders to relax their lending policy to assess affordability through salary and dividends. Their lending policy is amongst the most flexible and even if you have only been contracting for a short period and haven’t got prior accounts to support your application, that won’t rule you out.

These days they offer mortgage underwriting to all kinds of contract-based workers.

This all sounds exceptionally good news to contractors, but… (there’s always a but!) you must have been in the same line of work for at least two uninterrupted years before you started contracting.

To be sure you’re getting the best rates based on all your circumstances, speak to an expert whole-of-market mortgage broker, we can connect you to one of the experts we work with for free.

Is there a mortgage calculator I can use?

While there are many mortgage calculators toted by various sites on the web, none of them will give you accurate answers about what you could borrow or how much your mortgage is likely to cost you. The answers to these sums will come down to your mortgage terms, the provider and the rates you can secure.

We’ve taken the liberty of doing some of these rough sums for our customers and you can see how much a particular sum of borrowing might cost in relation to various interest rates on our Mortgage Repayment Tables page.

To find out what you could borrow and how much your repayments will actually cost, talk to one of the expert brokers we work with.

Get advice from an expert broker

Call 0808 189 2301 or make an enquiry and we’ll match you with one of the expert brokers we work with, ensuring that they have specialist knowledge of arranging IT contractor mortgages for other happy customers.

All the experts we work with are whole-of-market mortgage brokers with access to all the banks and lenders in the UK. Using their skill, knowledge and specialist tools, they will scour the market to make sure you get the right mortgage with the best available rates based on your specific circumstances and needs.

The service we offer is free and there’s absolutely no obligation to take the advice you receive.

Updated: 11th June 2020
OnlineMortgageAdvisor 2020 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.