Navigating the complex world of remortgaging can be daunting for self-employed individuals, so this guide aims to demystify this process and equip you with all of the knowledge and tools required for finding an optimal mortgage deal tailored to your unique circumstances.
Understanding Remortgaging
Before diving deeper into the process of renewing your self-employed mortgage, it’s essential to have an understanding of its general concept. This section will give a complete picture of what remortgaging entails: its differences from traditional mortgages, potential motivations, and when is the best time for you.
What is Remortgaging?
Remortgaging is the act of switching your existing mortgage for one with another lender if more attractive terms become available, or simply as part of financial management strategy that could unlock equity from your property and help secure better loan terms or release some equity from it.
How Does Remortgaging Differ from a Standard Mortgage?
While a standard mortgage is used to purchase a property, a remortgage involves switching your current mortgage agreement for a new mortgage deal – possibly with your existing lender or with someone new. Remortgaging could save money either through lower interest rates or by tapping into equity from your home and can save time.
Why Consider Remortgaging?
Remortgaging may be beneficial for you for various reasons. Your current mortgage agreement could soon expire or you could find an even better offer elsewhere, or maybe consolidating debts or raising funds for home improvements are among your goals.
When is the Best Time to Remortgage?
Remortgaging should usually occur once your current mortgage rate has come to an end; early redemption charges (ERCs) no longer apply, allowing you to switch without incurring high fees. However, depending on its terms it might still be worthwhile changing during its term if that would benefit.
The Self-Employed Remortgage Process
For self-employed individuals, learning the remortgage process and how to remortgage may seem daunting due to the additional steps and considerations involved. This section will guide you through each step, from reviewing your current self employed mortgage deal to submitting your application, to ensure a smooth and successful remortgage process.
Understanding Your Current Mortgage Deal
Before considering remortgaging, it’s essential that you understand your current mortgage rate thoroughly – including knowing your interest rate, remaining term, early repayment charges and type (fixed vs variable etc). With this knowledge in hand, remortgaging could be the right decision for you.
How does the self-employed remortgage process work?
Remortgaging the home for self-employed individuals is generally similar to remortgaging for employed individuals, though some additional considerations must be taken, including providing proof of income and understanding how lenders view your employment status.
Remortgaging when you are a business owner involves several important steps that you need to follow, here is an in-depth guide that can help explain them:
Step 1: Look through your existing mortgage paperwork
As part of your remortgage process, it’s crucial that you review your current mortgage deal. Go over all paperwork carefully in order to understand when its term will end and how much interest is charged monthly as well as the monthly mortgage repayment amounts.
Step 2: Speak to an experienced mortgage broker
Experienced mortgage brokers can be invaluable when searching for a remortgage. They will be able to assist in finding lenders offering competitive deals for self-employed individuals as well as help you compare these offers with your current mortgage agreement.
Step 3: Find and compare the best deals
Your mortgage broker can guide you towards lenders who will most likely accept your application and offer the most advantageous terms.
Step 4: Check Your Credit Score
Before applying for a remortgage loan, it’s crucial that you check your credit score. Achieved this can increase the odds of approval.
Step 5: Submit Your Application
Once your research and selection process are complete, it is time to submit your application for a remortgage. A mortgage broker is ready and waiting to manage this entire process from start to finish.
Factors Affecting Self-Employed Remortgages
As a self-employed individual applying for remortgage loans, lenders will take several key factors into consideration when reviewing applications. Understanding these will allow you to tailor your application more successfully and increase the odds of finding an attractive remortgage deal.
- Credit Score: Mortgage lenders take your credit score into consideration when reviewing your remortgage application and having an improved score increases the odds of approval when seeking to remortgage loan funds.
- Loan to Value (LTV): Loan to Value Ratio (LTV) ratios can also play an integral role. Paying down an effective portion of your current mortgage loan could create more equity in your property. A lower LTV can attract more lenders offering the most competitive rates.
- Income Verification: For self-employed people, proving income can be a bit more complex than for those in traditional employment. Lenders will typically want to see at least two years’ worth of accounts or tax returns. However, some specialist lenders may accept one year’s worth of accounts or even consider your retained profits.
- Business Structure: Your business structure can also impact your application for a remortgage. Whether you’re a sole trader, a partner in a partnership, or a director of a limited company, different lenders may have different criteria.
Tips for Self-Employed Remortgagers
Successfully navigating the remortgage process as a self-employed individual requires careful planning and preparation. Here are some practical tips that may increase your odds of securing an attractive remortgage deal:
- Maintain and Update Your Accounts Regularly: Keeping your accounts current, up-to-date, and well-organised can make the remortgage process smoother. It demonstrates the stability of your income and can be beneficial when lenders assess your application.
- Consider Specialist Lenders: While mainstream lenders may sometimes be more cautious when dealing with self-employed applicants, specialist lenders often have more flexible criteria and may be more willing to consider your application.
- Seek Professional Advice: Navigating the remortgage process can be complicated for self-employed borrowers. Obtaining advice from a mortgage advisor or broker may help clarify your options and locate a more advantageous loan deal.
Further Considerations: Remortgage for Self Employed
As a self-employed person applying for a remortgage, lenders will take several key factors into consideration when reviewing applications. Understanding them will enable you to tailor your application more successfully and increase the odds of finding an attractive remortgage deal.
Understanding Your Business Structure: Sole Traders versus Company Directors
Your business structure can significantly impact your mortgage application. For instance, as an independent sole trader, your income will usually be assessed on the basis of total profit; for limited company directors, however, lenders may consider both your salary and any dividends received as sources of income.
Tools for Decision Making: The Remortgage Calculator
Remortgage calculators can be invaluable tools in your decision-making process, providing an estimate of how much your monthly mortgage repayments would increase annually if you opt not to remortgage and instead return to your lender’s Standard Variable Rate (SVR). Simply by inputting your details below into our calculator, you can assess the potential financial repercussions between staying with your existing mortgage deal versus refinancing and seeing the potential financial impacts of both routes – remember we are here to help you find better offers!
Strengthening Your Application: Show Proof of Future Work
To strengthen your remortgage application, consider showing proof of future work or contracts. This can demonstrate to lenders that you have a steady income stream in the future, increasing your chances of approval.
Exploring All Options: Using Your Current Lender as a Backup
If you’re having difficulty finding a new lender, don’t rule out your current one as an option; they might be more willing to provide a remortgage deal than any newcomers would be.
Seeking Expert Help: Using a Whole of Market Broker for a Self-Employed Remortgage
Consider consulting a whole-of-market mortgage broker. They can access loan deals from all available lenders, not just one or two. Doing this may help you secure the ideal mortgage deal for your circumstances. Alternatively, click here for more self-employed mortgage advice guides.
FAQs
Can you remortgage if you are self-employed?
Yes, self-employed remortgage applicants can remortgage. You will need additional documentation such as tax returns or business accounts as proof of income; in some instances, lenders may impose additional requirements specific to Freelancer or contractors when remortgaging.
Is it harder to remortgage if you're self-employed?
Remortgaging as a self-employed individual may prove more complicated due to additional paperwork and proof-of-income requirements; however, with proper preparation and the support of an experienced mortgage broker, the process should run smoothly.
What if I'm newly self-employed? Can I still remortgage?
Yes, self-employed remortgaging is still possible after starting their business. While most lenders require two years' accounts before considering applications from borrowers for self-employment remortgage loans, specialty lenders may accept applications with one years accounts.
What happens to my mortgage if I become self-employed?
Self-employment doesn't directly impact your current mortgage. But, if you want to remortgage or move home, additional proof of income may be required from you. Therefore, keeping accounts up-to-date and maintaining good credit score are wise practices.
How many times my salary can I borrow for a mortgage if I'm self-employed?
If you're self-employed, you're generally able to borrow around four to five times your yearly income when you're looking to secure a mortgage loan. However, keep in mind that this can vary from lender to lender, as they'll take into account things like your credit score and outgoings. If you're not sure about anything, don't hesitate to reach out to a mortgage advisor. They're there to help and can provide advice that's specifically tailored to your unique situation.
How can I remortgage without proof of income?
Remortgaging without proof of income can be challenging. Most lenders require proof of your ability to make monthly repayments; for self-employed applicants, this could include financial records or tax returns as proof.
Do I need to tell my mortgage lender if I go self-employed?
If you become self-employed, usually no notification needs to be provided to your current mortgage lender; however, if you decide to remortgage, however, then this must be disclosed to any new lenders involved in your remortgage process.
Conclusion
Remortgaging as a self-employed individual might seem complicated, but with proper preparation and advice, it’s achievable. By understanding your current mortgage, contacting a mortgage broker, comparing deals, checking credit score history and submitting completed applications you can successfully navigate the remortgage process with confidence. Bear in mind that every lender has different criteria so obtaining professional advice as well as looking at all available options prior to making any definitive decisions could prove extremely helpful in finding an attractive deal with the lowest mortgage payments
