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As an IT contractor, you enjoy a flexible and rewarding career path with higher earning potential and the ability to work on your own terms. However, securing a mortgage as a contractor can feel more complicated than for traditional employees. The good news? IT contractors are often treated favourably by certain lenders—it’s all about knowing where to look.
This guide covers how IT contractors can secure a mortgage, what lenders consider, and how to navigate the process to find the best deal for your situation.
Benefits of Being an IT Contractor
The IT industry is thriving, and as a contractor, you benefit from:
- Higher earning potential: Contractors often command higher daily rates compared to equivalent salaried positions.
- Flexibility: The freedom to choose your projects and schedule.
- Tax efficiency: Limited company structures can provide tax benefits.
While contracting offers great advantages, its lack of traditional employment stability can make some lenders cautious. Luckily, many lenders recognise the high demand for IT contractors and offer tailored mortgage solutions.
How Lenders Assess IT Contractors
Unlike most self-employed borrowers who require two years of accounts, IT contractors can often secure a mortgage based on their gross contract value rather than company profits or dividends.
Here’s an example:
- If you earn £500 per day, lenders might calculate your gross annual income as:
- £500/day × 5 days/week × 46 weeks/year (allowing for holidays) = £115,000 annual income
- This method often allows for higher borrowing potential than relying solely on limited company accounts.
Can I Get a Mortgage If I’m Inside IR35?
Yes, it’s possible to get a mortgage if you’re inside IR35. Some lenders specialise in contractor mortgages and focus on your contract rate rather than how you’re taxed. However, if you’re inside IR35, it’s essential to work with a broker who knows which lenders will consider your situation favourably.
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What Do Lenders Consider for IT Contractor Mortgages?
1 Time Contracting
- Some lenders have no minimum time requirement, especially if your income exceeds £75,000 annually.
- Others may require 6 months to 2 years of contracting experience.
2 Income
- Lenders are often more generous to those earning £500+ per day or £75,000+ annually.
3 Contract Length Remaining
- Some lenders require a minimum of 6 months remaining on your current contract. Others are more flexible if you have a history of contracting in the same field.
4 Industry Experience
- If you’re new to contracting but have prior experience in the same industry, it can strengthen your application.
How Much Can IT Contractors Borrow?
IT contractors can typically borrow 5 to 5.5 times their gross annualised contract value.
For example:
- If your gross annual income is £115,000, you could borrow between £575,000 and £632,500, subject to affordability checks.
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What About Locum IT Contractor Mortgages?
Locum contractors face slightly different considerations:
- Some lenders require you to have been working on a locum basis for at least 12 months, while others may accept an average of 3 to 6 months’ earnings.
- Certain lenders may also require a permanent role alongside your locum work.
What Deposit Do I Need?
Deposits typically start at 5% of the property value, but better rates are available for those with 10-15% or more. If you’re looking for a competitive rate, saving for a larger deposit can significantly improve your options.
Which Lenders Are Best for IT Contractors?
The best lender depends on your circumstances. Some lenders, such as NatWest, Halifax, and Bank of Ireland, specialise in contractor-friendly mortgages and may use your gross contract value for affordability calculations.
Others, such as Santander and HSBC, may base affordability on traditional self-employed earnings, which could limit your borrowing potential if your company retains profits.
Speak to an advisor today, to lock you in with the best deal.
How Strive Can Help
At Strive, we understand the unique challenges and opportunities IT contractors face. Whether you’re inside or outside IR35, just starting contracting, or navigating variable income, we can help you:
- Identify lenders who consider gross contract values.
- Maximise your borrowing potential.
- Find competitive rates tailored to your circumstances.
With our expertise, you can focus on your work while we handle the details of securing your mortgage.
FAQs About IT Contractor Mortgages
Yes! Many lenders focus on your contract rate rather than your tax arrangements, so being inside IR35 doesn’t have to be a barrier.
This varies. Some lenders require at least 6 months remaining, while others are more flexible if you have an established history of contracting.
Not necessarily. Many lenders will base affordability on your gross contract value, even if you don’t have two years of accounts.
Some lenders have no minimum time requirement, especially for those earning over £75,000 annually.
Yes, certain lenders consider retained profits alongside salary, which can boost borrowing potential if you leave money in your company.
Deposits start from 5%, but better rates are available with 10-15%+ deposits. Ready to start? Contact Strive today and let us guide you through the process!
