Remortgaging if you are Self Employed or a Contract Worker
If you’re self-employed or a contract worker, you may be wondering whether you can remortgage your property.
The answer is yes – your self employed status shouldn’t be a barrier to remortgaging.
However, it can be a more complicated process than if you’re paid a salary. The following 5 tips from our specialists will help you secure the best remortgage deal for your financial situation.
In this guide:
1. Get your paperwork in order
When you apply for a self employed remortgage, your lender will need to verify your work status.
Regular employees only need to present pay slips dating three to six months back, but if you’re self employed, your lender will want to review at least two years of your accounts – and sometimes more.
Here are some examples of valid documentation you’ll need to provide:
- Bank statement
- Tax returns
You need to ensure that you’ve registered with HMRC if you are self employed and have your Unique Taxpayer Reference (UTR). This provides further evidence to lenders as it verifies your work status.
If you’re remortgaging as a contractor or freelancer, your lender will request recent payslips and the details of your contract. This is particularly important if you are working a short-term contract (less than 12 months).
Ideally, you’ll have evidence of at least 2 back-to-back contracts and at least 12 months on your current one. If you have less than this, you’ll probably need to speak to a specialist mortgage broker to see if any lenders would consider your application based on your circumstances.
You'll also typically need 2 years of tax returns, but there are ways to get a mortgage with just 1 years' accounts.
2. Provide proof of future income
Whether you’re self-employed or a contract worker, your lender will ask for evidence of any impending income or contracts that you have lined up for the future. This is because your lender wants to ensure that your earnings are stable and predictable enough to sustain the monthly repayment plan of a long term remortgage.
The more stable your income, the better chance you have of finding a lender and securing the best remortgage deal possible. Your lender will be more confident in drafting a remortgage deal if your income is:
- Steady, regular and predictable
- High enough to pay monthly repayments
- Extensive enough to prove that your client base has longevity
3. Work on your credit score
Before you apply to remortgage as self employed or a contract worker, make sure to check your credit score. It can take some time to tidy up your credit score, so we recommend working on it for three to six months before you intend to remortgage your property.
Check the details on your credit report carefully – an incorrect address somewhere might be a small detail, but it can have a big impact on your score if not amended.
A good credit score proves that you can manage your money carefully and effectively. It also demonstrates sound financial foresight when borrowing money, and that you can make your repayments on time.
Our guide to improving your chances of getting a mortgage includes our top tips on how to check and improve your credit score.
4. Lower your LTV
The loan to value (LTV) of your mortgage is calculated by dividing the value of your mortgage by how much your property is worth on the market.
Your LTV is dependent on the initial deposit you put down and the equity you own in the property. If your property has risen in value, you may be able to move to a lower LTV band, which could get you a better interest rate than your first mortgage.
This can be beneficial if you’re remortgaging as a self-employed worker who doesn’t yet have three years of accounts. If you can secure a lower LTV, it offsets some of the risk on your lender’s behalf and makes your application more attractive.
5. Use a specialist mortgage advisor
If you’re wondering how to remortgage if you’re self-employed or a contract worker, we would recommend shopping around for different deals with various lenders before settling on one.
You might get a better deal by shopping around than just sticking with your existing lender – loyalty isn’t always rewarded very well in the borrowing world.
Remember - transferring to a new mortgage is a decision that shouldn’t be taken lightly, so take your time - and always read the fine print.
At Clifton Private Finance, our specialist mortgage advisors provide a highly professional service to guide you through the remortgaging process. We offer expert advice and put you in touch with the best lender for you.
Whether you’re self employed, contracting, or have any other type of unique income, our professional team can source remortgages for residential and buy to let properties across the UK.
Book a free and no obligation telephone consultation at a time that suits you:
Or call us now, on: 0117 959 5054
And for more information on the remortgaging process, read our full guide, here.