Remortgage When Self – Employed

Straightforward mortgage advice from expert brokers. Finding the perfect mortgage just for you without the jargon. 

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Straightforward mortgage advice from expert brokers. Finding the perfect mortgage just for you without the jargon. 

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Remortgage When Self – Employed, Vantage Mortgages

Remortgage When Self - Employed

Adam Messer explains the remortgage process for those who are self employed.

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

Yes, you can and it’s not any harder, particularly. When we say self-employed, we could also be talking about directors of limited companies as well.

It’s just slightly different. We’re going to ask for different things from you. If you’re employed you just need to provide payslips, while if you’re self-employed we will need some tax documents to show your income.

We’re going to be looking at net profit if you’re a sole trader. If you’re in a company we might ask for your company accounts as well, because different lenders take different income figures into account. To get the best lender for you, we might need more information to make the best decision.

Is it harder? No, not really. Lender criteria doesn’t really change in terms of Loan to Value requirements or the equity you need. The way they calculate your loan amount is the same as for anyone else.

How long do you have to be self-employed to remortgage?

Most lenders want two years’ self-employed figures, whether you’re a limited company or a sole trader.

If you’ve only got one year’s figures, that could still work, especially if you’re not increasing your borrowing and just changing your mortgage like-for-like.

It depends on what you’ve done before. If you’re an employed electrician and you go self-employed, you stand a good chance of being able to get a mortgage through some high street lenders with a year’s figures. But to get the best choice, we need two years.

Borrowing more on the mortgage is also not impossible, but it might just limit your choice.

For example, if I became a self-employed electrician I would struggle – lenders would be sceptical as to whether my income is sustainable. That’s the main factor when it comes to how long you’ve been self-employed.

Can you remortgage if you’re newly self-employed?

It depends what you need to do. If we want to change lenders, we can’t really use your income without at least a year’s figures. That’s not going to be possible.

But you might not need to remortgage. You might be able to stay with the same lender, which we call a product transfer. You just choose a new rate with them when your current deal ends.

Your current lender isn’t going to ask you about your income if you’re staying with them and keeping everything else the same. If you want to borrow more or make any other changes, you’re going to need more of a self-employment track record.

But if you’ve only just gone self-employed, don’t think that you can’t do anything and you have to go on to the lender’s variable rate. Avoid that, because it’s really high – that’s not what anyone wants. The worst case scenario is just to choose a new rate with your existing lender. It might not be the best on the market but it’s going to be better than the variable rate.

How does the self-employed remortgage process work?

It’s only the documentation that’s different – the actual process is the same. We start a few months early, we go to a new lender and choose the new rate, do the application and then a few months later on when your current rate finishes, it’s all lined up ready to swap over.

When you’re self-employed we need some different figures. We’re going to ask you for your SA302s or your tax calculations to tell us how much you’ve earned. We’re going to ask for your tax year overview, which shows us that your HMRC tax account is all paid and up to date.

If you run your own company, we’re probably going to ask you for your company accounts. We need at least the latest year, as that will usually have the previous year on as well.

That’s going to tell us whether we’re best off using your salary and your dividends as per your tax return, or whether we’re best off looking at the net profit from your business – some lenders will use that instead. It all depends how much we need to borrow and what you want to do.

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Can you remortgage with no proof of income?

We can’t move lenders. We always need to prove income if we’re moving lenders, but you can stay with your existing lender with no proof of income. You can just choose a new rate and do what we call a product transfer. If you can’t prove your income, that’s what you will have to do.

Can I remortgage if I have bad credit?

Potentially. It depends how bad and how old it is, but we help people with credit issues all the time. If it’s a minor blip a year ago, where you forgot to pay a credit card one month, that will have very little impact.

If you’ve got five recent defaults and three CCJs and none are settled, that’s probably going to be a real struggle. It’s very individual and bespoke with adverse credit.

We tend to help you get a copy of your credit report to see exactly what’s on there and decide which lender to go to. Again, you can always stay with the same lender for a product transfer. We can do that with all lenders – we’ll see what the best option is for you.

Can a self-employed person be declined a remortgage?

Anyone can be declined a remortgage, for various reasons. Bad credit is probably the main one. We wouldn’t expect a mortgage that we’ve done to be declined because of income, because we knew that figure before we submitted the application. We know what the lender is going to be looking for.

Sometimes people don’t tell us about debts and things in the background – that can cause a problem but, again, we’d pick that up before we did the application. We would do an Agreement in Principle which involves a credit check – so any issues would come up there.

So you could be declined, but not because you’re self-employed. It would be because you haven’t told us something or you’ve got some credit issues in the past that weren’t picked up. It’s quite unusual for us to have an application declined. But you’re no more likely to be declined than anyone that’s employed.

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

It depends what you want to do with your remortgage. If you’re just in search of a new deal and you don’t need to borrow anymore or make any other changes, you should be absolutely fine.

If you want to borrow some more money, we need to make sure there’s enough income or profit. Be mindful of that when you do your accounts each year. It also helps to make sure we have the right documents. But when we have an initial conversation with someone, we’ll always explain what documents we’re going to need. It’s often easiest to just ask your accountant for them, because they’ll have copies.

The time of year can have an impact when you’re self-employed. You don’t have to submit your tax return till the end of January. But most lenders will only use figures that are less than 18 months old. The tax year starts in April, so in October, the end of the previous tax year is more than 18 months ago.

We will need figures for the year we’re in. So in October 2024 we’ll need April 2024’s figures. It can sometimes mean getting your accountant on board and getting your figures done before you would normally do them. That’s just a little side note for that time of year. It’s only really relevant in October, November and perhaps December.

What are the benefits of remortgaging?

Mainly, getting the best deal. Usually you are best off as a new customer with a new lender – as with so many things in life. That’s not true of all lenders.

Also, if you want to make changes, to borrow more or less, change the term and those kinds of things, it’s generally easier with a new lender. With a product transfer, you pretty much change your interest rate and that’s it – everything else stays the same.

How can a mortgage broker help?

It’s knowledge, really. I know which lenders to go to and which lenders to avoid. We know what to say on applications and just generally where to go if your situation is at all complex.

If you are self-employed or you’ve got a company, speaking to a broker is going to find you the most appropriate and best mortgage for your needs. Your existing lender or whoever you bank with is not necessarily right for you, so always speak to a mortgage broker first.

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.