Remortgaging can save you thousands of pounds interest each year*, as it prevents you from being moved onto your lender’s higher Standard Variable Rate. You can also remortgage to release equity from your property to be used for home improvements, holidays, to buy a second property, for debt consolidation or for other acceptable purposes. Being self-employed shouldn’t deter you remortgaging – there are over 5 million self-employed workers in the UK, some of whom remortgage without any problems. It’s important to remember that there is no such thing as a ‘self-employed mortgage’ – as long as you pass the lender’s affordability and credit checks you’ll have access to the same mortgage products as an employed worker. The difference lies in the way in which you pass these checks, and that’s what we’ll explain in this guide.
Should I Remortgage if I’m Self-employed or Freelance?
Being self-employed can mean a lot of things. Perhaps you own your own company or perhaps you’re a sole trader or freelance photographer, musician, consultant or artist. No matter what type of self-employed person you are, you should be able to remortgage as long as you find the right lender. Why should you remortgage? As mentioned above, if you don’t remortgage at the end of your current fixed-rate deal, your lender will move you onto their higher Standard Variable Rate – meaning you could end up paying thousands of pounds more each year. Remortgaging to a better deal can be one of the most financially savvy things a homeowner can do. Aside from reducing your monthly mortgage payments, it is also possible to release cash from your home by remortgaging. This is a common way to raise funds because remortgage interest rates tend to be lower than most other forms of borrowing.
How Do I Remortgage if I’m Self-employed or Freelance?
Whether you were self-employed when you took out your current mortgage or you have recently become self-employed, you should be able to remortgage in a similar way to an employed person. The main difference is in how you prove you can afford the repayments without payslips. Preparation is key, and this is where a mortgage broker who has experience with self-employed mortgage applications is worth their weight in gold. Let’s break down the areas you and your broker will need to prepare before applying for your remortgage.
Past Income
Lenders will usually want to see at least three years of accounts, but some may accept one or two years. If you have become self-employed recently, come and speak to us for free and we’ll see when you’ll be ready to apply for your remortgage. Past income is one of the most important affordability factors, so start keeping accurate records as soon as you become self-employed, or better still, hire a chartered accountant.
Future Income
Some lenders require proof of future income, and all lenders will be happier if you can show them you have consistent work lined up. Perhaps you have contracts in place or regular retainer agreements with clients that can help your lender feel more confident that you’ll be able to keep up your repayments in the months and years ahead.
Credit Score
As with all forms of borrowing, showing you have a good credit history should help you secure a remortgage deal. We can look at your credit score during your FREE no-obligation consultation without doing a full credit check. Ideally, there would be no CCJs, defaults, or mistakes on your file – but if you do have a checkered credit history we may still be able to help you.
Loan to Value
When remortgaging, your Loan to Value (LTV) is worked out by looking at how much equity you own versus your remaining mortgage loan (or new mortgage loan if you wish to borrow more). The lower your LTV, the better chance you’ll have of being accepted for a good deal. If your property has increased in value or you’ve paid off some of your mortgage loan, you may now be in a lower LTV bracket.
Should I Use a Mortgage Broker to Remortgage if I’m Self-employed?
Professional advice from a mortgage broker is invaluable for any mortgage applicant, and even more so if you’re self-employed. Our advisors will help you prepare your past and future income and assess your credit history (without putting your credit score at risk). Once we understand your situation and your remortgage goals, we’ll search thousands of products from hundreds of lenders to find a deal that suits your needs. Many high street lenders are wary of self-employed applicants, and being rejected for a remortgage can damage your credit score. As we understand the criteria of each lender, we’ll only suggest products you’re very likely to be accepted for and we’ll apply on your behalf to ensure your remortgage journey is a success. It’s completely free to chat with us so you can understand the process and see what options are available to you – simply book in for a FREE no-obligation consultation. If you decide to remortgage to reduce your monthly repayments or release equity, a one-off broker fee may be payable.
The Bottom Line
Over half of all homeowners remortgage at the end of their fixed-rate deal* because this can save thousands of pounds in interest each year compared to paying the Standard Variable Rate. Remortgaging is also an opportunity to borrow more money if you need to raise funds for things like home improvements, property investments, holidays, or debt consolidation. Being self-employed shouldn’t deter you from remortgaging as there are plenty of lenders that cater for the self-employed. However, to pass the lender’s affordability checks you will need to prove your past income – preferably the last 3 years or more. Showing proof of future income can also help your application. Some lenders are wary of self-employed people, so it’s important you speak to a mortgage broker before applying so you don’t risk damaging your credit score by being rejected.
We’ve been helping self-employed clients remortgage for over 30 years! We search thousands of products to find the right deal for your situation. We’ll also guide you through the process and liaise with your lender and solicitor to ensure the process goes smoothly for you.
Book your FREE no-obligation consultation with one of our friendly advisors to get going quickly. We have offices in Frimley and Basingstoke, or we can help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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*Source: https://www.which.co.uk/news/2021/04/homeowners-who-fail-to-remortgage-pay-thousands-extra-in-interest-every-year/
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