Remortgage When Self-Employed

Remortgage When Self-Employed

Gary Clarke explains how remortgaging works if you are self-employed.

Is it harder to remortgage if you are self-employed? How does it work?

The short answer is yes, just on the basis that there are fewer choices. Having said that, the process is largely the same as any other remortgage. You still have to provide the same documents. The main difference is the proof of income you have to provide.

How long do you have to be self-employed to remortgage? Can you remortgage if you’re newly self-employed?

Typically you need to be self-employed for a minimum of one year. Two years or more is better, because you’ll have more options as far as lenders go.

How does the self-employed remortgage process work?

The process is basically the same. The difference is in your proof of income. An employed person would typically provide three months’ pay slips, but depending on the type of self-employment that you have, you may be required to provide company accounts or tax documents.

It could be your tax calculations and matching tax year overviews, as well as potentially your business bank statements. These help to show you are maintaining a similar level of turnover within the business.

Can you remortgage with no proof of income?

Typically not, as you might expect. You do normally have to prove your income, particularly when you’re moving from one lender to another. The new lender will want to check you can comfortably pay that mortgage.

However, that’s not the case if you are doing a ‘product transfer,’ where you’re just swapping deals with your current lender without any additional borrowing. They won’t actually ask for updated proof of income – they assume that your financial situation would be approximately the same or better.

So strictly speaking, you don’t have to have proof of income, in very specific circumstances. But otherwise, the answer is a very firm yes.

Can I remortgage if I’m self-employed and I have bad credit?

Absolutely. The main aim for a remortgage is to avoid going onto a lender’s standard variable rate. These are typically much higher than the normal rates you pay.

But as we cover on other podcasts around adverse credit, it really does come down to what’s registered, the value, when it was registered and whether it’s been settled.

All of those things can have an impact on the rate you pay and how much you can borrow. Of course, if you’re borrowing more money it might also affect the lenders that you can go to.

If you’ve never missed a payment on your current mortgage and you’re not looking to borrow any more money, usually a product transfer is a good way to avoid that scrutiny.

Can a self-employed person be declined for a remortgage?

Yes – anybody can be declined for a remortgage, depending on their circumstances. As a general rule of thumb, if there is something you think could be a problem, tell us as much about it as you can. We take that information and find the most appropriate lender for your circumstances.

Bear in mind that sometimes we use the term ‘decline’ when someone is unsuccessful in applying for the maximum possible loan. Here, the lender might be happy to lend to you, but not the amount you’re requesting.

How can I better my chances of a good remortgage as someone who is self-employed?

Preparation is key. That means keeping good records, making sure that your self-employed accounts are submitted on time and that you’ve got the paperwork to HMRC punctually. Make sure your tax bill is paid when it’s due, and that you can provide us with documentary evidence of that.

Gather company accounts, business bank statements, tax calculations and tax year overviews. You’ll also need the standard items – three months’ personal bank statements, proof of ID, proof of address – notwithstanding any other requests the lender might have.

What are the benefits of remortgaging?

The main benefit of remortgaging is to avoid going on to your lender’s standard variable rate. Typically a deal from a lender would be cheaper than that.

But at the same time as remortgaging, you may want to consider whether there’s a legitimate reason to borrow a little bit more. Maybe you’d like to make some home improvements, or there’s a big family holiday or car purchase to consider. It could be effective to do that by way of remortgage.

Potentially, you could consolidate some debts if that’s appropriate. You’ve always got to be very careful when considering additional borrowing – you’re securing that against your house. The more borrowing you have secured against your property, the bigger a risk it becomes. The most important thing is that you can continue to afford your payments.

How can a mortgage broker help here? Is there anything else we need to know?

As always, preparation and keeping good records are key – but, also, tell your mortgage advisor everything. If you’re not sure about something, get it on the table and let us help work out whether it’s a problem or not.

Sometimes people have the impression that something will be a big issue, but it turns out to be something very small. Conversely, people can unintentionally forget to tell us something that turns out to be really important.

The more information we’ve got, the more likely you are to get a great outcome. Ultimately, it’s all about getting you the best possible deal for your circumstances. The more we know about you, the better the chances are of that happening.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.

YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.