Being self-employed makes getting a mortgage feel more daunting, and remortgaging is no exception, yet it’s far from impossible. While lenders will ask for additional evidence of your income, the process is very much achievable with the right preparation.
If you’re looking to secure a more competitive interest rate or release equity, then remortgaging is still a smart move. In this guide, we’ll go over how remortgaging works for self-employed borrowers, including what you can do to improve your chances of success.
Table of Contents
What counts as being self-employed?
Mortgage lenders use a fairly broad definition of self-employment. In particular, you’ll be classed as self-employed if you own a significant share of the business that provides your main income, i.e., from 20% to 25% and over. This applies whether you’re a sole trader, in a partnership, or a director of a limited company.
You’ll also fall into the self-employed category if you earn your living through contract work or freelancing. As long as this income forms the bulk of your earnings, or you’re relying on it to meet affordability requirements, lenders will assess you as a self-employed applicant.
Can I remortgage if I’m self-employed?
Yes, being self-employed doesn’t prevent you from remortgaging. In fact, if your fixed-rate or introductory deal is coming to an end, remortgaging means you avoid being moved onto your lender’s standard variable rate, which will be more expensive.
The remortgage options available to you will depend on several factors, including how long you’ve been trading and how stable your income appears. When you apply, the new lender will assess your finances in much the same way as they did when you first took out your mortgage.
As such, if you were already self-employed when your current mortgage was approved and your financial situation hasn’t changed significantly, you’ll be in a strong position. If you became self-employed after taking out your mortgage, you can still remortgage, but you’ll need to show a reliable income history. Specifically, lenders want to see between two-three years’ worth of accounts, as this demonstrates consistency. That said, there are some lenders who will consider applications with just one year of figures, depending on the circumstances.
Is it harder to remortgage when self-employed?
For the majority of self-employed borrowers, remortgaging isn’t significantly more challenging. The main stumbling block will be if you’ve only recently started working for yourself because, without a sufficient track record of income, lenders struggle to assess affordability, which thereby limits your options with a new provider.
In this situation, one alternative is to move onto a new deal with your current lender through a product transfer. Since they already hold your financial details, the approval process is more straightforward and doesn’t require the same level of income evidence as a full remortgage application.
However, product transfers won’t offer the most competitive rates, generally speaking. So, although they’re a convenient short-term solution, it’s still worth reviewing the wider market when your circumstances allow, given that switching lenders could ultimately lead to better long-term savings.
How to get a self-employed remortgage
If you’re planning to remortgage, getting organised early makes a real difference, especially if you’re self-employed. Preparing in advance puts you in a better position to access competitive rates and avoids unnecessary pressure as your current deal comes to an end.
A lot of lenders let you lock in a new rate three to six months before your existing mortgage expires, which gives you plenty of room to breathe. So that things run more smoothly, here’s some steps you should take before applying.
Build up your credit score
A solid credit record plays an important role in any remortgage application because it reassures lenders you manage borrowing responsibly and keep up with repayments. This is doubly important if you’re self-employed, as it balances any perceived income uncertainty.
You can improve your credit score by making all your repayments on time, keeping your credit card balance low, as well as reducing those existing debts where you can. Even small improvements make a big difference in the context of lenders assessing your application.
Gather your documents
Before applying for a remortgage, lenders will need evidence of your income, so having the right documents prepared in advance saves time and reduces delays. As we mentioned, for self-employed applicants, this implies providing two to three years’ worth of SA302s, alongside a clear breakdown of your regular income (factoring in dividends if you’re a director of a limited company) and ongoing expenses.
SA302s are annual tax summaries which confirm your declared earnings and the tax you’ve paid, and they have a large part in helping lenders assess affordability. Getting these ready before you start comparing deals makes the whole process far more straightforward.
Show evidence of future income
Lenders don’t just look at what you’ve earned in the past, they also want reassurance that your income is likely to continue. Therefore, supplying evidence of future work, such as signed contracts, client retainers or confirmed bookings, illustrates ongoing financial stability.
This information strengthens your remortgage application and, in some cases, improves your options with lenders. It’s foremostly useful if your trading history is limited, due to the fact it supports your income position where a full two/three-year set of accounts isn’t available.
Compare deals from different lenders
Lending criteria varies widely from one provider to another. Whereas one lender could decline your application, another will be more flexible in how they view your income and affordability.
For that reason, it’s essential to look beyond a single provider and understand the full range of options available. On this point, specialist lenders could be better suited to your circumstances if your income is complex or harder to evidence.
Get specialist advice on self-employed remortgages
Remortgaging as a self-employed borrower has become a lot less complicated in recent years. With the right prep, the process is much like remortgaging as a salaried employee, yet it’s still important to make sure you’re getting the best possible deal.
Our online comparison tool lets you quickly compare remortgage deals from across the UK in that it offers a wide selection of competitive rates, updated daily, so you can easily identify the choices which suit your circumstances.
Once you’ve found a deal that looks good, our advisers will be at hand to give personalised guidance. We take the time to understand your current finances and goals so that you end up choosing a mortgage which genuinely fits your needs.
If anything remains unclear, then be sure to reach out. Our aim is to make the remortgaging process simple, cut through the jargon, and support you in securing a deal that works for you.
No, being self-employed doesn’t automatically make a remortgage more costly since lenders base their rates on overall risk, which considers factors like your credit history, the proportion of your property you own (as represented by your LTV ratio), and your monthly income, as opposed to your employment status alone.
About the Author:
Matt is a top contributor at Speedy Remortgage and has worked in the financial services industry for over a decade now. Through his expertise on mortgage and remortgage has helped hundreds of customers to achieve their property goals.