If your fixed-rate term is coming to an end, you might be thinking about remortgaging your property. When the fixed-rate term comes to an end, your lender may switch you to a standard variable rate mortgage. This means your mortgage repayments could go up or down every month. To avoid this, many people will remortgage and switch to another fixed rate term.
If you are self-employed, remortgaging might not be as simple as for anyone else. To start with, self-employment comes in many different forms, and your employment status will impact the type of mortgage products you can access.
You could be the director of a company, own shares in a company, or you could be one of the many professionals that are classed as self-employed. Musicians, actors, freelancers and consultants are all classed as self-employed. If you aren’t sure, ask yourself this: do you fill in a self-assessment tax return? If you do, there is a good chance you will be classed as self-employed.
Anyone in this category will have to be aware of additional requirements when you begin a remortgage application. Even if you have only recently switched to self-employment, you will need to keep these things in mind before you can apply. As with anything in life, preparation is key. Here’s what you need to know to increase your chances of success with a self employed remortgage application.
Lenders are mainly concerned with affordability. They want to know that your monthly income is enough to cover your mortgage payments and additional expenses. For the self-employed, this can be more difficult to determine, as they don’t usually have a fixed salary.
Most lenders will ask to see the last three years of financial accounts. Your end of year SA-302 forms are usually sufficient, but some lenders may ask to see a more detailed breakdown. You may wish to work with a chartered accountant to help you get this in order.
Past performance is not always a good indicator of future performance when it comes to freelance income. Lenders may ask to see evidence of future work contracts to prove that you have a steady stream of income.
Lenders look at your credit score to determine if you have been good with money in the past. Pay down your debts, keep your credit usage under 25% of the total limit, and try to avoid missing any payments. You can read more about improving your credit score here.
To increase your chances of success, always work with a mortgage broker to help you find and secure the best deal. They will know which lenders are most likely to accept your application, reducing the chance of your application being rejected.
Being self-employed should not stop you from securing a mortgage. There might be a lot of horror stories about how difficult it is for the self-employed, but don’t let this hold you back.
If you have moved to self-employment since securing your mortgage, working with a specialist broker will help you to navigate this field.
If you were self-employed when you first secured your mortgage, the process of remortgaging will be very similar. Head to our self-employed hub to find out more.