1 .Use a specialist IT contract mortgage broker
As a specialist IT Contractor Mortgage Broker we can assess the best way to present your income to the lenders. Packaging your IT Contractor mortgage we look to see if a lender will consider you are an employee , self employed, a limited company director or a day rate contractor. Being considered as a day rate IT Contractor can be the most advantageous for maximum borrowing possible and we will work to insure that you get the best balance between maximum borrowing and the best interest rate whilst remaining affordable
2.Keep it clean
Make sure your credit history is as clean as possible – Get a free credit report
3.Day Rate can best
How much is your day rate? If the calculation is less that £50,000 per annum most lenders will only consider you on the same basis as for a company director mortgage or self employed mortgage. There are one or two who may consider less and may still do day rate but restrictive by other factors. Loan to Value etc. For the best IT contractor mortgage though you really have be earning over £50,000. Approximately £225 per day ( see IT contractor day rate calculation example below)
4.Timing of application
Timing is everything with a IT Contractor mortgage – Minimum 12 month track record of contracts with a minimum of 3 months remaining on the current contract. If less than 3 months remaining on current contract then you generally must have a 2 year track record of contract work.
Some lenders may accept a letter of intention to renew in lieu of an actual new contract if it is something that will definitely happen bar confirming the IT Contractor new contract
5.Mind the gap
Avoid lengthy gaps between IT contracts. Make sure you CV is up to date showing your continual employment or contracts in the same profession. Note you don’t necessarily have to have more than 12 month IT Contractor experience as long as you can demonstrate that you have had more than 12 months in the IT industry. Preferably more than 24 months if a new IT contractor. IT Contractor mortgage lenders do not like risk. If you have gaps longer than 6 weeks between contracts this can potentially be an issue unless there is a justifiable reason. If you were employed for a short period or were on a lengthy training course then document this in you CV that you provide us. It will restrict the lenders we can approach but can make the difference between a flat decline and a maybe. Especially if you are now starting a new 12 month IT Contract
6.How much can you borrow?
Example of how to calculate income for IT Contractors:
- Current contract £500/day,
- Weekly – £480 multiplied by 5 = £2,400
- Annually – £2,400 multiplied by 46 = £110,400 (a 46 week year is generally used to account for holidays)
- This income can then typically be multiplied by 4.5 to 4.75 times subject to credit commitments and lifestyle affordability
7.How are you paid? Limited Company or Umbrella Company ?
If you are paid via a limited company and we cannot demonstrate your numeration as daily rate IT contractor or your income is too low to be considered for an IT contractor mortgage. Then we would look to secure you a limited company director mortgage and it would follow the process in that article.
If you are working under an umbrella company and we cannot demonstrate your numeration as a daily rate IT contractor, then different lenders consider your income in different ways. Some will also have restrictions on the maximum loan to value that they will lend as well.
The majority of lenders will consider this form of being renumerated as if you are an employee. As long as the umbrella scheme has a transparent and straightforward process of demonstrating income and associated tax due. If the umbrella scheme incorporates loan backs / off shore or complicated structures that would leave the lender questioning what the actual taxable income is then it will needless to say often not be acceptable. If it is transparent then the majority of lenders will look at the income on your payslips and P60 including Basic, commission and expenses. However like an employee if you have structured your payment in such away that the majority is commission based then not all of that income maybe considered or some form of historical demonstration that it is regular may be sought. This may still not be as advantageous as a day rate calculation.
Some lenders will consider that you are still self employed even though you are in affect an employee of the umbrella company and will want evidence of tax calculations and returns
In almost all cases income has to be paid in UK Sterling and tax paid in the UK
8.Rates the same as employed?
Once we have proved your income as an IT contractor then the mortgage lenders that accept this kind of income will provide you a mortgage at the same rates as an employee. You will not be disadvantaged just because the way you receive your income is complicated. It is purely reliant on how we best put forward this information to the appropriate lender and if there are any other effecting factors. Poor credit / large debts / Loan to Value etc that would similarly affect and employee
9. Big is best
Deposit Size – the bigger the better. Like all mortgages the less you borrow as a percentage of the property value, the lower the risk to a lender if they had to repossess and therefore the lower the interest rate charged generally is Rates usually are adjusted in 5% intervals . ie a 90% Loan to Value (LTV) mortgage is more expensive than an 85% LTV mortgage. An 86% LTV mortgage would be rounded up and would come under the 90% LTV mortgage. So work out those key points when you are considering how much to borrow
10. Contact us
Contact us fee free mortgage broker . If you have any questions or queries based upon your own personal IT contractor mortgage circumstances. Did I mention we are free?