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Why can it be a challenge to get a mortgage as an IT Contractor?
IT contractors and other self-employed people can be concerned with whether they will be approved for a mortgage, how much they can borrow and what terms they can get. For IT contractors, many of whom can command an hourly rate far exceeding other professions, it can seem confusing and frustrating that mortgage providers are not willing to lend. Many IT contractors manage are careful with their finances, optimising tax efficiency through running their operations as a limited company.
The good news is that there are lenders who are willing to accept applications from IT contractors.
As a whole of market broker, at Teito, our experts work with more than 100 lenders and have access to over 20,000 mortgage deals. We work hard to find your perfect mortgage and make the process as straightforward and streamlined as possible. Start comparing deals now.
What mortgages are available for IT contractors?
Various specialist lenders are offering dedicated mortgages for contractors.
In addition, many mainstream lenders have also recognised that there has been a shift towards self-employment, and have made changes to cater to this sector. Lenders are starting to incorporate more flexible underwriting criteria to allow a fair evaluation for those who do not have payslips to prove their income.
Will I have to prove my income?
Yes, industry regulation means residential mortgage providers are obliged to demonstrate you can sustain mortgage repayments.
Proving your income is one way you can show lenders you are capable of repaying your mortgage. As a minimum, you will need to produce 9-12 months of accounts, although this will limit the number of lenders available to you. With 2-3 years of accounts, the number of available mortgage lenders will increase, giving you access to better rates.
What qualifies as self-employment income?
When applying for a self-employed mortgage, how you trade and the specific lender will affect the kind of income you report. For example, you will declare your income differently as a company director compared to a sole trader.
Typical self-employed incomes that are accepted by providers:
Sole trader
- For self-assessment SA302 forms, this is your total income.
- If using accounts, net profit is declared.
Partnership
- For self-assessment SA302 forms, this is your share of the total income.
- If using accounts, your share of net profit is declared.
Limited company
- Your share of the director's salary and dividends are declared.
- In certain situations, lenders may occasionally consider the net profit.
A few tips for IT contractors:
- Develop an information pack to show your work track record, including earnings.
- Save more towards a deposit to adjust your Loan to Value ratio; this will give you access to better interest rates and reduce the risk to lenders.
- If you have a hole in your work history, try to provide evidence.
- If you have a strong track record or confirmed upcoming work, you may be able to bypass the two-year requirement.
- Understand your credit history and take steps to improve your credit account if needed. Spend sensibly on a credit card and pay it off.
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Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
Last updated 29 February 2024