Self employed remortgage: Read our guide to the reasons, the pitfalls & why we believe we can always help you
Confused by the jargon, not sure whether you’re looking for a mortgage or a self-employed remortgage?
Remortgaging is simply the process of taking out a new mortgage on a property that you already own, rather than moving house. In most cases this will be to be replace a current mortgage, although occasionally you may own the property outright and are looking to raise additional funds.
The self-employed bit is slightly more difficult, as there’s no universal UK definition when it comes to mortgages! If you’ve not got an easily provable income via payslips, whether that’s because you’re a freelancer, a sole trader or a company director paying income via dividends, you end up being classed as looking for a self employed remortgage by lenders. This can mean proving income and finding decent mortage deals on the high street is much more dificult.
If you do want to change your current mortgage, you’ll want to make sure that you get the most appropriate deal for your circumstances. Looking for a new deal is often not straightforward, and it can be even more complicated when you are self-employed.
We’ll look at why using a broker to handle your remortgage application will always save you time and stress, as well giving you the best chance of getting a money saving mortgage deal.
Before we do, we’ll examine why you might be looking for a new mortgage in the first place.
Self-employed remortgage guide: Reasons for remortgaging
There are a number of reasons why you might be looking for a new mortgage deal for your current home.
1. The end of your introductory deal
The overwhelming majority of mortgage borrowers choose a mortgage with an initial incentive period. This is the length of time during which interest rates on your mortgage loan are more favourable by being discounted or fixed. After this period, generally between 2 and 5 years, your interest rate reverts to the Standard Variable Rate. Before your incentive period expires you will usually be contacted by your current lender informing you of this and often offering you a new deal.
2. Looking for a better rate
You may feel that there are better rates available than the one you have currently, or more likely, your current deal is finishing. While it’s possible that could find a more favourable deal, you should also be aware of any penalties that you may be subject to for exiting your current mortgage deal early often outweigh the upside.
When your current deal ends, in most cases, penalties and tie-ins end too. This is the ideal time to search the entire market to get the best mortgage deal available to you.
3. Consolidating debt
If you have accrued a significant amount of debt, you may be tempted to consolidate this by remortgaging your current property. While this can make sense in some circumstances, it does require a great deal of thought and formal advice, as you will in all likelihood be transferring unsecured debt into secured debt.
4. Raising money to invest in your business
If you want to inject cash into your business, you may decide to release some of the equity in your home via a new mortgage. Not all lenders will lend for business purposes, although a broker experienced at finding remortgage deals for the self-employed will be able to ensure that you only apply to lenders who will.
5. Carrying out home improvements
Most people need to borrow funds to carry out any major work on their home, as extensions, new heating, bathrooms or kitchens don’t come cheap! It’s often far better to raise the money for this work via remortgaging to borrow more against your home, as the interest rates are far lower than credit cards or loans.
6. Your home has increased in value
If the value of your property has increased significantly since you took out your mortgage it follows that your mortgage loan amount will form a smaller percentage of that value. What this means for you is that you may have a much lower loan-to-value ratio, and subsequently will be eligible for the better deals with lower interest rates. While an application to a new lender will take this into account, your current mortgage provider may not have taken any increases in the value of your property into consideration. This means they may not be offering you their best deal.
7. Added flexibility
If your business is performing better than it was when you took out your current mortgage you might want the opportunity to make overpayments when funds allow. On the other hand, if you occasionally face short-term cashflow problems you may be investigating the possibility of securing a mortgage deal that allows payment holidays, or just increasing the amount you borrow. Finding a new mortgage deal that reflects your circumstances could give you the flexibility you are after.
Not sure if you’d be seen as self employed by mortgage lenders? Read our guide and use our Self Employed Mortgage Calculator
Self-employed remortgage guide: How an expert broker at Simply Lending Solutions will help you
Using a professional, CeMAP qualified mortgage broker like the team at Simply Lending Solutions can help with the remortgaging process in many ways. The specialist mortgage brokers at Simply Lending Solutions have the advantage of working regularly with self-employed people to help find them the most appropriate self-employed remortgage deal for their individual situation.
Simply Lending Solutions have access to the whole of the market. This means they are not tied to just one lender, or to a small panel of lenders.
When it comes to a self employed remortgage, the more products your broker has access to, the more choice there is for you. If you have been offered a remortgage deal by your current lender, Simply Lending Solutions’ access to multiple lenders increases the likelihood that they will be able to beat their deal by viewing the whole remortgage market.
Less work for you
The last thing any busy self-employed person needs is to spend hours or days trying to find a great remortgage deal. That’s why many just settle for the one their current lender offers, even when they could save significant sums over the next 2 or 3 years.
When you use a broker however they take all that work away from you. At Simply, we’ll search the market for you, considering your entire situation to find a suitable lender.
At Simply Lending Solutions we also understand what documentation lenders will want to see, and we’ll make sure that we have everything from you early in the process. Again, saving you time and stress during the application process.
Understanding the market (and understanding you)
One of the pieces of documentation that lenders will want to see is proof of your income. If you’re self-employed this means a copy of your recent SA302 tax returns. If you were self-employed when you were accepted for your current mortgages you will not only be familiar with what is needed, but you will also in all probability have 2 years tax returns at the very least – which is what is required by most lenders.
However, if you have become self-employed in the period since you last applied for a mortgage you may only have accounts for the last year or two (or possibly even less time). Alternatively, you may have reduced your income to maximise tax efficiency. Both of these situations can make finding a lender more difficult. The good news is that Simply Lending Solutions works with lenders who are happy to accept tax return evidence covering shorter periods, or take your businesses retained earnings into consideration. So, although there may be fewer to choose from, we should be able to find you a suitable remortgage lender.
Our brokers will also work with you to understand the terms of your current mortgage. This allows us to take into account any penalty payments you may be liable for when calculating which is the best option for you. We’ll also review any fees against interest rates and really find the best option, whatever your circumstances. We can often offset any costs in this area by saving you money in other areas, for example Simply Lending Solutions will frequently be able to secure lower fees on your remortgage deal than you would have been able to find independently and better rates than your current bank offers.
Self-employed remortgage guide: Don’t pay a penny if we can’t find you a better remortgage deal
When it comes to remortgaging, especially when self-employed, sticking with your current lender often seems the easiest path to take. Even though many lenders will allow you to switch your mortgage to a new deal online, which sounds simple, it’s often not in practice. The process can still be time consuming, complicated and usually relies on you managing all of it by a certain date to avoid your interest rate going up the standard variable rate. You will probably also want to see if there are any better deals elsewhere, but many people never do this!
When Simply Lending Solutions handle your self-employed remortgage application, we will of course consider any options that your current lender may have. If it turns out that after reviewing the entire market we can’t find you a better deal, then we will still process the application for you, handling all the documentation and communication with the lender for you, and you won’t pay us a penny. There really is nothing to lose.