Remortgage When You Are Self-Employed

Can You Remortgage If You Are Self-Employed?

Yes, you absolutely can remortgage if you are self-employed. While some high street lenders have stricter criteria for self-employed applicants, many mainstream and specialist lenders actively welcome self-employed borrowers and offer competitive rates.

The main difference between a self-employed remortgage and one for an employed person is how your income is assessed. Employed borrowers simply provide payslips, but self-employed applicants need to demonstrate their income through accounts, tax returns and other financial documentation.

Lenders typically want to see at least two years of trading history, though some will consider applications with just one year of accounts. The amount you can borrow is usually based on your average net profit over the last two or three years, or in some cases the latest year if your income is rising.

Your credit history, existing debts and the amount of equity in your property will also play a significant role in determining what deals are available to you. A clean credit record and a lower loan-to-value ratio will generally open up better rates.

It is worth noting that the self-employed mortgage market has become much more accommodating in recent years. Lenders have developed a better understanding of self-employment and many have created specific products and criteria for self-employed borrowers.

What Documents Do Self-Employed Borrowers Need?

Gathering the right documentation is one of the most important steps in a self-employed remortgage application. Being well-prepared can speed up the process significantly and improve your chances of approval.

Most lenders will ask for the following:

• SA302 tax calculations - These are your tax computation documents from HMRC, covering the last two or three tax years
• Tax year overviews - These confirm the figures on your SA302s and can be downloaded from your HMRC online account
• Certified accounts - Full accounts prepared by a qualified accountant, usually covering two to three years
• Bank statements - Three to six months of personal and business bank statements
• Proof of identity and address - Passport, driving licence and utility bills
• Details of existing mortgage - Your current mortgage statement showing the outstanding balance

If you operate through a limited company, you may also need to provide your company accounts, CT600 corporation tax returns and details of any dividends and salary you have drawn.

Some lenders will accept an accountant's certificate as an alternative to SA302s, while others may request both. It is always best to check with your broker or lender about their specific requirements before applying.

Having your documents organised and ready before you start the application process can save considerable time and reduce the risk of delays.

How Lenders Assess Self-Employed Income

Understanding how lenders calculate your income is crucial for knowing how much you can borrow. Different lenders use different methods, which is why working with a broker who understands the self-employed market can be so valuable.

For sole traders and partnerships, lenders typically look at your net profit before tax as shown on your SA302s or certified accounts. Most will take an average of the last two or three years, though some will use the latest year's figure if your income is trending upwards.

For limited company directors, the assessment can vary significantly between lenders. Some will only consider your salary and dividends, while others will also take into account retained profits within the company. This difference in approach can dramatically affect how much you can borrow.

Income multiples for self-employed borrowers are generally the same as for employed applicants, typically between 4 and 4.5 times your assessed annual income. However, some lenders offer higher multiples of up to 5 or even 5.5 times income for higher earners or those with strong financial profiles.

Lenders will also consider your regular business expenses, any outstanding business debts, and whether your income has been stable, growing or declining over the assessment period. A consistent or rising income profile will always be viewed more favourably than one that is falling.

Tips for Getting the Best Self-Employed Remortgage Deal

There are several things you can do to improve your chances of securing a competitive remortgage deal as a self-employed borrower.

Keep your accounts up to date. Ensure your tax returns are filed on time and your accounts are prepared by a qualified accountant. Lenders view late filings negatively as it can suggest poor financial management.

Minimise your tax deductions carefully. While it is perfectly legitimate to claim all allowable expenses, be aware that reducing your declared income to minimise tax will also reduce how much you can borrow. You need to find the right balance between tax efficiency and borrowing capacity.

Build your deposit or equity. The more equity you have in your property, the better the rates available to you. If possible, try to keep your loan-to-value ratio below 75% to access the most competitive deals.

Clean up your credit record. Check your credit report well in advance and address any errors or issues. Pay down credit card balances and avoid making multiple credit applications in the months before your remortgage.

Use a specialist broker. A mortgage broker who specialises in self-employed mortgages will have access to a wider range of lenders and will know which ones are most likely to approve your application on favourable terms.

Consider the timing. If your income has been growing, it may be worth waiting until your latest accounts are available before applying, as some lenders will use the most recent year's figure rather than an average.

Separate personal and business finances. Keeping clear boundaries between your personal and business bank accounts demonstrates good financial management and makes it easier for lenders to assess your application.

Common Challenges for Self-Employed Remortgage Applicants

While self-employed remortgages are entirely achievable, there are some common challenges that applicants may face. Being aware of these in advance can help you prepare and avoid potential pitfalls.

Fluctuating income. Many self-employed people have income that varies from year to year or even month to month. Lenders prefer stable, predictable income, so significant fluctuations can make the assessment more complex. Having at least two years of consistent or growing income will help.

Complex business structures. If you have multiple income streams, own several businesses or have a complex corporate structure, some lenders may struggle to assess your application. Specialist lenders are often better equipped to handle these situations.

Recent changes to your business. If you have recently changed the nature of your business, moved from employed to self-employed status, or restructured your company, some lenders may want to see a longer track record before approving your application.

Low declared income. If your accountant has been particularly aggressive in minimising your taxable income, your declared earnings may not support the level of borrowing you need. In these cases, some specialist lenders may consider other evidence of affordability.

Industry-specific concerns. Some industries are viewed as higher risk by lenders, particularly those that are seasonal, cyclical or heavily affected by economic downturns. If you work in one of these sectors, specialist advice can be particularly valuable.

Despite these challenges, the vast majority of self-employed homeowners who seek professional advice are able to find a suitable remortgage product. The key is working with advisers who understand your situation and know which lenders to approach.

Self-Employed Remortgage With Bad Credit

Having adverse credit on top of being self-employed can make remortgaging more challenging, but it is certainly not impossible. There are specialist lenders who cater specifically to borrowers with complex circumstances including both self-employment and credit issues.

The impact of bad credit on your remortgage options will depend on the nature and severity of the credit issues. Minor problems such as a single missed payment from several years ago will have much less impact than more serious issues like a recent CCJ or bankruptcy.

Factors that lenders will consider include:

• The type of adverse credit - Missed payments are viewed less seriously than defaults, CCJs or bankruptcy
• How long ago it occurred - More recent issues carry more weight than those from several years ago
• The amount involved - Larger debts are generally viewed more negatively
• Whether the issue has been resolved - Satisfied defaults are better than unsatisfied ones
• Your current financial behaviour - Evidence of responsible financial management since the adverse event

Interest rates for self-employed borrowers with bad credit will typically be higher than standard rates, but they can still be considerably better than staying on your current lender's standard variable rate. A specialist broker can help you find the most competitive option for your specific circumstances.

Why Use a Specialist Mortgage Broker?

While it is possible to approach lenders directly, using a specialist mortgage broker can significantly improve your chances of success and potentially save you money as a self-employed borrower.

A good broker will have access to the whole of the market, including specialist lenders that do not deal directly with the public. They will understand how different lenders assess self-employed income and can match your circumstances to the most suitable products.

Brokers can also help you present your application in the best possible light, advising on which documents to provide and how to structure your income evidence. This can be particularly valuable if your income is complex or has fluctuated.

Many brokers offer a free initial consultation where they can assess your situation and give you an idea of what deals might be available before you commit to a full application. This can save you time and avoid the risk of unnecessary credit searches that could affect your score.

When choosing a broker, look for one who is authorised and regulated by the Financial Conduct Authority (FCA) and who has specific experience with self-employed mortgage applications. Ask about their fee structure upfront so there are no surprises later.