Remortgaging When You’re Self-Employed

Remortgaging is becoming increasingly important with the cost-of-living crisis beginning to hurt most people’s pockets.

By remortgaging you avoid going onto a lender’s standard variable rate – a rate that can prove extremely costly.

Being self-employed and faced with the prospect of a remortgage can be intimidating to say the least.

As a self-employed person, you may be worried about how to show your income or whether you have enough income to pass an affordability calculation.

The great news is that lenders are much better at assessing self-employment compared to many years ago and with more people becoming self-employed, the range of products and services is expanding to cater to that.

Let’s explore getting a mortgage or remortgaging when you’re self-employed.

What is Remortgaging?

When you take an initial mortgage product you will ordinarily be offered what’s known as a mortgage deal.

This isn’t always the case and if you have poor credit or struggled to find a lender initially, you might have been placed automatically onto a variable rate mortgage.

Regardless of which route you took; remortgaging will be a great idea when your mortgage deal ends or to get away from the variable rate product.

Remortgaging allows you to take another mortgage deal, essentially negotiating a more competitive rate than a standard variable rate (SVR).

This keeps your monthly costs manageable and ties you into another deal for a set period of time.

Over the course of a typical 25-year overall mortgage term, you might remortgage many times, always ensuring that when one deal ends, you’re on the best deal going forward.

This might seem like a lot of hassle, but the truth is that although you will need to make an effort to remortgage, the amount of money you can save by ensuring you’re on the best deal can be staggering.

If you use a fee-free broker to do the work, like Boon Brokers, there is minimal effort required from you to process a remortgage. 

When you consider that mortgages are often over £100,000 in value and they have interest attached to them, the difference between a low interest rate and a standard variable rate payments can be tens of thousands of pounds in the long-run – if not more!

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How Does Remortgaging Differ from a Standard Mortgage?

As mentioned, remortgaging is the act of obtaining a new mortgage deal on an existing mortgage.

Your initial mortgage will be a little more detailed than a remortgage as lenders will need to assess you as a customer and the property to check that it is mortgageable.

When you come to remortgage, the lender will have an idea of your ability to repay your existing mortgage and will know that the property is mortgageable in most cases.

This means a remortgage with the same lender, technically known as a product transfer, can be an extremely streamlined process and complete within 24 hours.

Even when switching lenders, you will find the remortgage process in most cases is far quicker than a purchase mortgage application. 

Unfortunately, one such complicating factor is self-employment and if you’re remortgaging as a self-employed person, you may find a remortgage takes additional weeks to complete.

Despite this, when compared to the months an initial mortgage application can take to complete, remortgaging is often much simpler and expedient.

Can I Remortgage When I am Self-Employed?

Yes, you can remortgage as a self-employed person in almost all cases with a few notable exceptions.

Remortgaging when self-employed requires you to provide evidence of your self-employment, as well as your Tax Calculations & Tax Year Overviews or company accounts.

Sometimes, lenders will ask for additional information, especially if you have had a large capital expense in the last trading year or if it is hard to discern a baseline for your income.

In these cases, the lender may request you obtain an accountant’s letter.

The accountant will then confirm your income and this evidence will be used ALONGSIDE your tax filings.

It is rare for a lender to rely exclusively on an accountant’s letter, so you MUST make sure your tax records are up to date and are suitable for the mortgage you’re looking to obtain.

Can I Get a Standard Mortgage When I am Self-Employed?

Yes, getting any mortgage product is theoretically possible and you will have access to the same products as employed applicants. 

With that said, getting a mortgage for the first time as a self-employed person can be tricky and you may have a few additional hoops to jump through in order to get the mortgage you want.

Don’t despair though, below we outline everything you will need to do as a self-employed person to get a mortgage as well as common pitfalls to avoid when making a mortgage application.

Types of Self-Employed Remortgage

There are many types of self-employment and there are many lenders that assess self-employment in different ways.

The most common types of self-employment are:

  • Sole traders / Partnerships
  • Company directors (LTD)
  • Company directors (LLP)
  • Contractors

Depending which of these categories you fall into will depend on the type of evidence you will need to provide to a lender.

We have prepared a simple graph to show the type of evidence you might be expected to show to a lender depending on which type of self-employment you fall into.

As mentioned, different lenders have different ways of assessing your income.

Some lenders will want an extensive history of your self-employment and request that you have a number of years trading before they can offer you a product.

Most lenders request the latest 2 years of Tax Calculations & Tax Year Overviews before they can accept your self-employment income. 

Other lenders are more flexible and will only request your latest years’ accounts. 

Some lenders allow company directors to use their company accounts for affordability calculations.

This is because they understand some directors opt not to take a salary and dividends and keep the money in the company.

A company director in this situation would still have access to those funds if they wanted to drawdown from the company and a lender might evaluate this for income.

Other lenders are much stricter though and request company directors have Tax Calculations that demonstrate the salary and dividends they have taken before assessing income.

The absolute truth of the matter is you will find your self-employment varies from someone else’s self-employment.

As a result, you will have different needs when approaching a mortgage and it is best to discuss your situation in full with a mortgage broker like Boon Brokers.

Boon Brokers will take detailed information about your situation and establish which lender is best for you and the income you can demonstrate.

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Sole Trader Remortgage

In order to get a sole trader remortgage, you will need at least one years’ accounts. This is evidenced by your Tax Calculation & Tax Year Overview statements that are provided by HMRC when you have filed your tax return.

If you haven’t traded for a year or more, you will NOT be able to get a mortgage as all lenders require at least one year’s accounts.

Aside from your statement from HMRC, the lender is likely to ask questions about your self-employment so they can ascertain that your future earning potential won’t differ considerably from your historic earnings.

A common question asked is whether you anticipate your income to increase or decrease over the next few years.

Answering this question might not be enough to satisfy a lender and they may require documentation such as future contracts or agreements you have.

In some cases, they may ask you to provide an accountant’s letter that confirms the information you have provided is accurate.

If you don’t use an accountant and file using the HMRC simplified accounting process online, you may need to still use an accountant to evidence your mortgage.

Accountants are used to this type of work, and it won’t be an issue for you to approach one with your accounting history and ask them to conduct work on your behalf for the lender.

Company Director Remortgage

Remortgaging as a company director can be straightforward or difficult depending on how you drawdown your income and which lender you’re using.

When it comes to being a company director, using a whole of market broker like Boon Brokers can be invaluable as some lenders are very strict – and others that are extremely flexible.

Boon Brokers will be able to advise which lender is best for your specific circumstance.

Many lenders request an accountant’s letter for company directors in addition to your HMRC tax filings.

If you want to use your company accounts rather than your drawn-down income speak to Boon Brokers today.

Another aspect that could be a factor as a company director is any debt the company holds where there is a director’s guarantee. Lenders may take such agreements into account when assessing whether to extend a mortgage to you.

The nature of the directors’ guarantee will ultimately help the lender make a decision and once again if you’re concerned this might be an issue, Boon Brokers has extensive experience arranging mortgages for company directors including those with director’s guarantees.

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What if I am Newly Self-Employed?

If you’re newly self-employed (within the last year) you will need to wait until you have traded for a year and filed your first tax return.

That doesn’t mean you can’t prepare for a remortgage or mortgage in advance of your first filing.

Oftentimes it helps to get everything sorted so that as soon as your filing has been made you can proceed with a mortgage application.

Boon Brokers can help prepare you for a mortgage application and explain the documentation and evidence you will personally need as a newly self-employed person.

Self-Employed Remortgage Tips

Below we have outlined some handy tips to make getting a self-employed mortgage or remortgage a lot simpler.

Manage Your Credit Record

Often overlooked, but important, nonetheless.

Staying on top of your credit report can be vitally important when you’re self-employed as you may find the lenders that consider your income are limited.

It can be extremely disheartening to find the lender that is best for your situation won’t lend to you because your credit score comes back poorer than expected.

Ensure your credit score is as good as it can be before making a mortgage application and make use of advice and tips provided to improve your credit score by credit reference agencies.

This issue really can be the difference between you affording a mortgage or not.

Get Your Paperwork Prepared

Lenders love paperwork and if you’re self-employed the likelihood is they will request plenty of it.

Make sure you have your tax statements ready and any details of expenses you have claimed during the period of time the lender will request.

Remember with simplified accounts these often appear as a ‘block’ figure and a lender might want to scrutinise your accounting in more detail than HMRC.

Aside from that, contact Boon Brokers and ask if there is anything else specific to your situation that will be requested by a lender.

Once you have this information you can collate all the paperwork ready to provide to the mortgage underwriter. Being prepared can speed up the process considerably.

Show Evidence of Future Work/Income

If you anticipate your income will change, make sure you also include information such as contracts to demonstrate this.

Lenders will not take your word for it in most cases and will ask for some form of evidence. 

If your contract is coming to an end and you’re a contractor, you might need to show the lender your plan for either your next contract or how you intend to pay the mortgage beyond that.

It can be a hassle to try and source this information, but it can also be the difference between getting a mortgage or not.

Use a Whole of Market Broker for a Self-Employed Remortgage

There are some mortgage brokers that aren’t whole of market which means the access they have to lenders is limited. In some cases, these brokers only have access to a single lender.

A whole of market broker has a panel of lenders that represents every area of the mortgage market. 

Using Boon Brokers who is a whole of market mortgage, insurance and equity release broker can really help you get the successful outcome you want.

This is because Boon Brokers has access to lenders who are flexible with self-employment. Boon Brokers offers fee FREE advice so don’t delay and call Boon Brokers today.

Gerard BoonB.A. (Hons), CeMAP, CeRER

Gerard is a co-founder and partner of Boon Brokers. Having studied many areas of financial services at the University of Leeds, and following completion of his CeMAP and CeRER qualifications, Gerard has acquired a vast knowledge of the mortgage, insurance and equity release industry.