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How To Remortgage If You Are Self Employed

You may wonder whether you are able to remortgage your home if you are self-employed or a contract worker.

It is possible to remortgage despite being self-employed.

There is, however, a greater complexity involved than if you were paid a salary. You can secure the best remortgage deal for your financial situation with these 5 tips from our specialists.

The following are included in this guide:

  1. Make sure your paperwork is in order

  2. Prove your future income

  3. Improve your credit score

  4. Reduce your LTV

  5. Consult a mortgage specialist

1. Organise your paperwork

The lender will need to verify your work status when you apply for a self-employed remortgage.

A regular employee only needs to present pay stubs dated three to six months back, but if you're self-employed, your lender will want to review at least two years' worth of accounts.

You should aim to provide the following documentation:

  • Bank statement

  • Invoices

  • Tax returns

If you are self-employed and have a Unique Taxpayer Reference (UTR), you should register with HMRC. In addition to verifying your employment status, this provides further evidence to lenders.

Whenever you remortgage as a contractor, your lender will ask for recent payslips and your contract details. When working a short-term (less than 12 months) contract, this is particularly important.

You should have at least two back-to-back contracts and at least 12 months of experience on your current contract. You may need to speak to a specialist mortgage broker if you have less than this to find out if any lenders will consider your application.

2. Prove your future income

You'll need to provide proof of any future income or contracts you have lined up, whether you're self-employed or a contract worker. Long-term remortgaging lenders require stable and predictable earnings in order to sustain monthly repayment plans.

You have a better chance of finding a lender and securing the best remortgage deal the more stable your income is. If you earn the following income, your lender will be more confident in drafting a remortgage deal:

  • Consistent, regular, and predictable

  • High enough to cover monthly repayments

  • You have a large enough client base to prove that your business has a long-term future

3. Improve your credit score

You should check your credit score before applying for a remortgage as a self-employed or contract worker. Rebuilding your credit score can take time, so we recommend working on it for three to six months before remortgaging.

If you don't amend an incorrect address somewhere on your credit report, it can have a big impact on your score.

It demonstrates your ability to manage your finances carefully and effectively when you have a good credit score. Furthermore, it demonstrates that you can make timely repayments when borrowing money.

4. Lower your LTV

You calculate your loan to value (LTV) by dividing the value of your mortgage by the market value of your property.

Depending on how much equity you own in the property and how much you put down as a deposit, you determine your LTV. Your property may be worth more than it was when your first mortgage was taken out, which may allow you to move to a lower LTV band, which could result in a lower interest rate.

Remortgaging as a self-employed worker without three years of accounts can be advantageous. Obtaining a lower LTV reduces the lender's risk and makes your application more appealing.

5. Consult a mortgage specialist

Before settling on a lender, we would recommend shopping around for different deals with various lenders if you're self-employed or a contract worker.

In the world of borrowing, loyalty isn't always rewarded very well - you may be able to get a better deal by shopping around.

If you're considering transferring to a new mortgage, be sure to take your time and read the fine print.

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