Mortgages For IT Contractors Explained

In this article, we’ll explain how to get a mortgage if you’re an IT contractor, what you can do to give yourself the best chance of approval and why you should speak to a mortgage broker who works in this niche before applying.

Can an IT contractor get a mortgage?

Yes. There are lots of mortgage lenders willing to approve mortgages for contractors. And as an IT contractor, you’re in an industry many providers view as secure.

Despite this, some mortgage providers refuse to offer mortgages to people not on PAYE. You must know which lenders to approach and how to package your application correctly to match their lending criteria.

How much can you borrow?

If you’re an established IT contractor with certified yearly accounts, lenders may use these to calculate your average income and determine how much you can borrow. If you don’t have certified accounts, some providers will accept SA302s from HMRC.

Alternatively, some providers use your day rate to calculate the maximum amount you can borrow.

Use our mortgage calculator to work out what your borrowing capacity might be.

Please note that this is a guide only. You should contact a broker for a more accurate idea of how much you can borrow based on your individual circumstances.

Mortgage lenders will typically calculate the maximum you can borrow by multiplying annual income by three, four or five times your annual income. This is fine for employees but more difficult for self-employed applicants and contractors.

How a mortgage broker can help an IT contractor get a mortgage

Some IT contractors can get mortgage deals at the best rates on the market – but not necessarily with all lenders. Certain lenders prefer not to loan to anybody with fluctuating income, and their rates reflect this.

However, some lenders understand the IT contractor market and are keen to lend money to borrowers who fit their risk profile and eligibility criteria.

For example, some lenders will consider the gross value of contract evidence of income for IT contractors, as they are deemed ‘professional specialists’ with job security.

Likewise, there are lenders who will assess applications from IT contractors working for an umbrella company in the same way as those of employees.

A whole-of-market broker, like the ones we work with, will quickly assess your situation to determine which lenders match your circumstances. Then, they’ll help you tailor your application to meet the provider’s requirements.

What are the eligibility criteria?

In addition to the standard eligibility and affordability criteria, some mortgage lenders have eligibility criteria specific to contractors, including those in the IT sector.

These include:

• Minimum trading period – Typically two years. Getting a mortgage with fewer than two years of trading history is possible, but you will have a smaller pool of lenders from which to borrow.
• Minimum income – £50,000 per year with some lenders, £75,000 per year with others. Not all providers place a minimum income on this type of loan.
• Contract length – The minimum acceptable contact length can be anywhere between three and twenty-four months. Many lenders will want to see evidence of renewal for contracts with less than six months left to run.
• Minimum day rate – Typically £250.
• Income gaps – Some lenders place a maximum number of weeks’ income gaps on the past twelve months (usually between six and twelve weeks).
• If you operate as a limited company, some providers will insist you own 100% of the company.
• Maximum loan to value – Varies between lenders but, where included, is usually between 80% – 95%.
• Maximum loan – Some lenders will loan a maximum of £250,000 to IT contractors.

Which lenders offer the best deals for IT contractors?

Halifax was one of the first major banks to offer contractor mortgages—available exclusively through intermediaries—and remains a forerunner in home loans for IT contractors.

Other high street names offering this type of loan include:

• Barclays
• Nationwide
• Santander (through intermediaries only)

But, in reality, there is no one-size-fits-all answer to this question. For example, if you’re an IT contractor with bad credit, the best lender for you may differ from that for someone earning the same money but with impeccable credit files. A mortgage broker with experience in this area will be able to help identify the right lender for your circumstances. 

How does IR35 affect your chances of getting a mortgage?

Being inside IR35 should not affect your chances of getting a mortgage, but it might determine which lender you should approach. This is because it affects how much tax you pay and how your income is calculated. As such, it will impact how your affordability is calculated.

If you work as an IT consultant with several clients, you must consider whether each contract is inside or outside IR35.

Get matched with a broker who specialises in mortgages for IT contractors

There are many variables when it comes to mortgages for IT contractors, and choosing the right lender can significantly increase your borrowing power. However, going with the wrong lender could see you pay over the odds for your mortgage or face rejection.

To avoid those pitfalls, our unique broker matching service will assess your circumstances and partner you with an expert broker who is experienced in helping IT contractors get the best possible mortgage.

To arrange a free, no-obligation chat with an advisor who specialises in this area, call 0330 818 7026 or enquire online.