Self Employed Remortgage

Paige explains the remortgage process for the self-employed.

Is it harder to remortgage if you’re self-employed?

Potentially – one of the things banks look at is whether your income is at the same level or higher than previously. If your income has gone down a considerable amount since you took out your mortgage, it can impact how much you can borrow.

That could make it a little bit more difficult to remortgage. If you’re about the same level and you’ve been paying off your mortgage it may not have any impact. It’s a very specific scenario for each individual.

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

You generally have to be self-employed for two years. With a two year history, you’re open to the whole of the market. But you can remortgage with one year’s accounts, and sometimes less – it just depends on the circumstances.

If you’re newly self-employed, this will be a lot more difficult. We would recommend having a chat with a mortgage broker to see if they can do anything. If not, they may still be able to get you a better deal with your current lender.

It’s just because you’ve got no income for a bank to work from – that’s the main factor that would impact you.

How does the remortgage process work if you are self-employed? Are there any differences?

It works very similarly to when you first buy a property. Lenders will assess your income, your credit commitments and your expenditure to make sure that the mortgage is going to be affordable for you on a monthly basis.

The main difference comes in if you’re going to be adjusting any of your current terms. Sometimes you might come up for a remortgage and you want to extend the term to make the monthly payments cheaper; or shorten it so you’re clearing your debt quicker. We can make those changes at the point of application.

Can you remortgage with no proof of income?

Yes, you can. There are a couple ways we can do this, and they generally involve sticking with your current lender. I would always speak to a broker, though. This is known as a product transfer – it’s essentially a remortgage with your current lender – and we can sometimes get exclusive rates that the bank isn’t offering direct.

The bank will move you immediately onto a new rate without reassessing your income. So if you have had a job shift in that time or you’re newly self-employed, your mortgage is based on your previous income and the bank will just go off of what they’ve already got about you. As you’ve not been missing your payments they assume you can keep on top of it.

Can I remortgage if I have bad credit?

Yes, but it may be more difficult. When this bad credit occurred can impact your options. If you’ve only recently got the bad credit, we would look at specific options for you with your current lender or a specialist adverse credit lender.

Depending on what’s better for you as an individual, we will suggest which remortgage route you go down. Generally speaking, if you are in mortgage arrears a lender may not offer you the option to stay with them, or you may have to go on to the standard variable rate. But depending on the level of bad credit and what it is, we will have different options available.

It’s specific to you as an individual, the mortgage you’ve got and a few other factors – but with anything to do with credit it’s definitely worth a conversation with a broker first.

Can a self-employed person be declined a remortgage? Why might that happen?
Yes, they can. if your income has dropped significantly over the last say two to five years, depending on how long you fixed your current product for, it can be declined.

That’s because the mortgage may not be deemed affordable in a new lender’s eyes. You can, however, stay with your current lender. They’re not allowed to make you unmortgageable – so your current lender may be the best option. Again, a broker will be able to figure that one out for you and find any better rates.

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

One of the main things is showing a consistent level of income prior to your remortgage. If your remortgage is coming up, you would want your income levels to be similar to what they were when you first did the application.

So, if you were on £30,000 when you applied for this mortgage and you’re still on £30,000 or above, you wouldn’t have too much to worry about. But if you’ve had a significant drop and now you’re on an income closer to £20,000, it’s worth having a chat and seeing what’s affordable for you.

The best documents to have ready are your SA302s and tax year overviews which you can download from HMRC or get from your accountant.

What are the benefits of remortgaging?

If you don’t remortgage, you go onto something called the SVR – the standard variable rate. It’s a very high rate that you fall onto once your fixed period is over. Generally this is around the 8% mark at the moment [podcast recorded in March 2024]. It fluctuates quite regularly.

It’s in line with the Bank of England base rate and other other factors that lenders base their mortgages on. It means your monthly payments will skyrocket. So remortgaging is almost essential in saving money that could be wasted on interest.

You can either get a new rate with a different lender, which will be more competitive, or offer some new incentives, or you will stay with your current lender on a better product than the standard variable rate.

You may have locked in a very low rate, like a lot of people did a couple of years ago, around the 1% and 2%. Rates are higher now at around 4% or 5%, but that is still significantly cheaper than going up to a rate of around 8%.

How can a mortgage broker help if somebody is looking to remortgage and they are self-employed?

A broker is always going to be able to find the best deal on the market. We can see what’s available across dozens of lenders. We’ll identify the most cost-effective deals for you based on your circumstances – or we can find you the best rate with your current lender.

We may have an exclusive product with your bank – and if not we can offer you exactly what a bank will offer you. We also keep track of rates. If they do come down over the period between you locking in a rate and your remortgage date, we can switch you on to a cheaper deal.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up with your mortgage repayments.

You may have to pay an early repayment charge to your existing lender if you remortgage.