We often get approached by IT contractors looking for a mortgage to buy a property, but unsure how much they can borrow. Or even if they'll qualify.
Fortunately, there are many lenders willing to consider IT contractor mortgage applications from consultants, software engineers, analysts and so on. If you're paid in a foreign currency, it's still possible to get a mortgage, though far fewer providers are available.
After reading this short guide, you'll come away understanding how contractor income is assessed, how much deposit you'll need, maximum borrowing amounts, and much more besides.
- How long do I need to have been contracting?
- How will my IT contractor income be assessed?
- How much can an IT contractor borrow?
- Can I get an IT contractor mortgage if I'm paid in a foreign currency?
- What documents do lenders require?
- What rates & products are available?
- Mortgage advice for IT contractors
How long do I need to have been contracting?
It depends on the lender's eligibility criteria. That said, a requirement for at least 12 months of IT contractor employment is quite common, just as it is with CIS contractors and other types of contractor roles.
Some banks and building societies require 24 months, though it doesn't necessarily need to be with the same employer.
Other Stipulations
Many mortgage providers require:
- no more than six weeks break between contracts
- a minimum of 6 months remaining on the contract OR
- a letter from your employer to state the contract will be extended/renewed.
I'm starting my first contract? Can I get a mortgage?
Yes, there are lenders happy to consider applicants starting on their first contract. To qualify, you'll need to have at least a couple of years permanent employment in the same or a similar role.
How will my IT contractor income be assessed?
How your contractor income is assessed depends on whether you're treated as employed or self-employed for mortgage purposes. Lenders consider:
- How your tax is paid?
- Whether you employ other IT contractors
- How much you earn
- Whether you have more than one contract
Employed vs self-employed for income assessment
If your employer or an umbrella company pays your tax, or you're a high earner (including contractors who are limited company directors), then you're likely to be treated as employed.
If you contract through what lenders call an intermediary such as your own limited company (sometimes referred to as a Personal Services Company), your tax should be paid and up to date.
High earning IT contractors
A high earner is usually defined as a contractor earning around £75,000 p.a. or £400-£500 a day. As IT contractors are in high demand, some mortgage companies treat IT consultants as employed, regardless of their income, or who pays their tax.
If you employ other contractors, or your limited company has contracts with multiple employers, then it's likely you'll be treated as self-employed.
So why does it matter how your income is assessed?
Mainly because it's much easier to evidence your income on an employed basis. The lender will likely just ask for:
- Your current contract AND
- Your last 3 months' payslips OR
- Your last 3 months' invoices and business/personal bank account statements
On the other hand, those assessed as self-employed will need to provide their current contract and some or all of the following:
- 2 years of limited company accounts
- Tax calculations or SA302 documents for the last 2 years
- Tax Year Overview documents for the past 2 years
- 3 months personal and business bank account statements
Quite the difference!
