Self-employed and contractor remortgages
It’s often regarded as being tricky to get a mortgage if you’re self-employed. But what about when it comes to remortgaging, how hard is it to get a self-employed remortgage? Fortunately there should be plenty of options, but there are a few things to consider, whether you’re a sole trader, a contractor, or a limited company.
What is remortgaging?
First things first: what is a remortgage? Simply, it’s the process of getting a new mortgage with a new lender. This is usually done when you come to the end of your current mortgage deal, and it can be done at any time during your term, although if you’re currently on a deal, watch out for hefty Early Repayment Charges if you decide to switch lenders early!
When you come to the end of your mortgage deal, you’ll usually be put on your lender’s Standard Variable Rate (SVR), which is often higher than the introductory rate. If you don’t remortgage and stay at this rate, it’s likely you’ll end up paying more than you need to. In the same way as when you took out your initial mortgage, you can also choose from various types of deals, such as a tracker mortgage or discounted rate mortgage where your interest rate can change over time, or a fixed rate mortgage where your payments will remain the same during the fixed rate period.
Can you get a self-employed mortgage?
Yes, just as with employed people, you can get a mortgage if you’re self-employed. And it’s a good idea to remortgage if you’re coming to the end of your fixed-term deal, as otherwise, you could end up paying more than you need to.
The remortgage deals for self-employed that are available to you will vary depending on a few things, including how long you’ve been working for yourself.
If you were already self-employed…
If you were self-employed when you got your original mortgage, then you should be in an excellent position to remortgage with a new lender, as long as your financial circumstances haven’t drastically changed.
When you remortgage, the new lender will carry out all the same checks as your original lender did. They’ll review your credit score, expenses and income - and if you’re still in the same financial position as when you took out your mortgage, you should have plenty of remortgage deals to choose from.
If you weren’t self-employed when you got your mortgage, but have been working for yourself for a while…
If you’ve become self-employed since you got your mortgage, you should still be able to get a remortgage if you have at least two years of accounts to prove your income.
Lenders want to see consistency in your earnings so prefer to see two or three years of records. However, some lenders have remortgage deals for self-employed if you have only one year of records. Our expert mortgage advisers at L&C can help you find the best lenders for your remortgage based on your specific circumstances.
If you’re newly self-employed…
Remortgaging when newly self-employed can be more difficult. If you’ve been working for yourself for less than a year, you may not be able to remortgage with a new lender, but it could be possible for you to switch products with your current lender.
Again, our expert advisers can review the options available to you and help you to understand whether you can remortgage with a new lender or if it would be better to get a new deal with your current lender.
What if you have a limited company?
Whether you're a sole trader or the director of a limited company, you count as self-employed - but things may be slightly different for you when it comes to remortgaging.
Either way, lenders will want to see your full accounts from the last two to three years. They'll often want to see your SA302s from the same period, too - that's the document from HMRC that proves your income.
If you're the director of a limited company, you likely pay yourself using a combination of salary and dividends. However, that can make it look as though your income is lower than it actually is.
Some lenders take retained profits (the amount of money left in your company account) into account when assessing your income, while others don't. L&C's mortgage advisers can search the market to find the right lender for you, particularly if you are self-employed and need a lender that considers retained profits - as this could result in you getting a better mortgage deal.
Can you get a contractor remortgage?
Most contractors have their own limited companies, so the process is the same for contractors as for limited company directors.
The problem contractors often face when it comes to getting a mortgage, or a remortgage, is that their income can fluctuate between contracts. As some contracts may only last for a few weeks or months, lenders may be nervous about offering you a mortgage deal in case you have no income between contracts and end up missing payments.
However, many lenders are willing to lend to contractors, so a remortgage for contractors may be easier to secure than you think. An expert mortgage adviser can support you in finding a lender that suits your circumstances. We have access to lenders that aren’t necessarily available on the high street - and all of our advice is completely free of charge.
Tips for remortgaging when you’re self-employed or a contractor
If you’re ready to start looking for remortgage deals for self-employed people, it’s a good idea to start preparing in advance, to give you the best possible chance of being offered a good remortgage rate. Some lenders will let you secure a deal up to 6 months prior to your current rate ending, giving you plenty of time to get your remortgage sorted.
Get your documents together
If you’re remortgaging with a new lender, they’ll ask to see your SA302s and audited accounts from the last two or three years. You’ll also be asked for details of your outgoings, including your bank statements. Make sure you have all of these documents to hand before submitting your remortgage application.
Show proof of future income
As well as evidence of past earnings, as a contractor it’s also essential to show proof of future earnings, whether that’s agreements for contract work in the near future, or retainers with clients. This will help to strengthen your remortgage application and may make lenders more inclined to offer you a deal.
