If you’re self-employed, remortgaging your home might seem daunting, especially with the extra paperwork involved. But, with careful preparation, the process can be straightforward. Here’s a simple guide to help you remortgage successfully when working for yourself.
What Is Remortgaging?
Remortgaging simply means switching your current mortgage to a new deal, either with your existing lender or a different one. You’re not moving house — you’re just replacing your old mortgage with a new one, often to get a better interest rate, change the term, or release some equity from your home.
Many people remortgage when their fixed or introductory rate ends, as they want to avoid slipping onto the lender’s higher standard variable rate (SVR). Others remortgage to borrow more money, perhaps for home improvements or to consolidate debts.
If you’re self-employed, the remortgaging process works much like applying for a new mortgage. The lender will want to see proof of your income, usually in the form of recent tax returns or company accounts, to check you can afford the new deal.
It’s worth reviewing your mortgage regularly — you might save a fair bit by remortgaging to a more competitive rate.
Would I Be Considered Self-Employed?
You’re generally considered self-employed if you run your own business and don’t work under an employment contract. This includes people who are sole traders, company directors (if you own a significant share, usually 20–25% or more), and partners in a business.
If you work on a freelance or contract basis — even if you only have one client — you’re usually classed as self-employed for mortgage purposes. This is because your income isn’t guaranteed in the same way as someone on PAYE (Pay As You Earn).
It’s important to note that even if you pay yourself a salary through your own limited company, most lenders will still see you as self-employed. You’ll need to show them business accounts and personal income records, not just payslips.
If you’re unsure, a mortgage broker can help you figure out whether you count as self-employed in the eyes of a lender.
Why Consider Remortgaging?
There are several reasons to remortgage:
- To secure a better interest rate and reduce your monthly payments
- To release equity for home improvements or debt consolidation
- To move from a variable-rate mortgage to a fixed-rate one for stability
For self-employed people, lenders might ask for extra assurances, but don’t let this put you off.
Step-by-Step Guide to Remortgaging as Self-Employed
1. Organise Your Financial Documents
Lenders typically ask self-employed applicants for more detailed financial proof. To speed things up, gather these documents early:
- At least two years’ tax returns or SA302 forms from HMRC
- Your latest business accounts, prepared by an accountant if possible
- Bank statements for the past three to six months showing steady income
- Evidence of any future work or contracts if applicable
Having these documents ready will make the application smoother.
2. Check Your Credit Score
Lenders carefully assess your credit rating. A higher credit score increases your chances of approval and helps you access better mortgage rates. Before applying, get your credit report online from services like Experian, Equifax, or ClearScore. Correct any inaccuracies, and ensure your payments are always made on time.
3. Understand Your Affordability
Lenders base their decisions on affordability, so be realistic about what you can afford to repay. Consider your earnings over the last two to three years, especially if your income fluctuates. Calculating affordability in advance helps you narrow down appropriate mortgage options.
4. Compare Mortgage Deals
Don’t settle for the first offer you see. Check comparison websites or speak to a mortgage broker who specialises in helping self-employed borrowers. Brokers often have access to deals not readily available on the high street. They can also advise you on which lenders favour self-employed applicants.
4. Choose the Right Mortgage Lender
Some lenders are more self-employed friendly than others. Specialist lenders and smaller building societies often provide more tailored assessments for self-employed borrowers. Avoid wasting time on lenders that prefer salaried employees.
5. Consider Using a Mortgage Broker
Mortgage brokers can save you time, money, and stress. They know the lending criteria inside out, and they can match you with lenders most likely to approve your application. Most brokers work on a commission basis from lenders, meaning they often won’t charge you directly.
6. Potential Challenges to Expect
- Variable income: Your fluctuating income can make lenders cautious. Having clear, documented evidence of consistent earnings over two or more years helps significantly.
- Short trading history: If you’ve been self-employed for less than two years, it might be harder to find competitive deals. However, specialist lenders exist for shorter-term self-employed borrowers.
- Complex financial setup: Limited companies or partnerships may require additional documentation, such as accounts and statements verified by qualified accountants.
How Much Does It Cost to Remortgage on Average?
Many people forget that remortgaging isn’t just about the new interest rate — there are also costs involved.
In the UK, the average cost to remortgage usually ranges between £1,000 and £2,000, depending on your lender and the type of deal you choose. Here’s a breakdown of the main costs you might face:
- Arrangement fees: Some lenders charge a product or arrangement fee, typically between £500 and £1,500.
- Valuation fees: If the lender needs to value your property, this might cost around £250–£500, though some offer free valuations.
- Legal fees: Legal work is needed for the remortgage process, usually costing £300–£700. Again, some lenders cover this as part of the deal.
- Early repayment charges (ERC): If you’re exiting your current mortgage before the end of a fixed deal, you might face an early repayment charge, often a percentage of your outstanding balance.
- Exit fees: Your current lender may charge a small admin fee, usually £50–£300, when you close the mortgage account.
It’s always worth adding up these costs and comparing them to the potential savings from switching deals. In many cases, the long
How to Find the Best Mortgage Deals for the Self-Employed
Finding the best mortgage deals when you’re self-employed takes a bit more effort, but it’s entirely possible with the right approach.
Here are some practical tips to help you get started:
- Work with a specialist broker: Mortgage brokers who regularly help self-employed clients know which lenders are more flexible and can access deals that aren’t always available directly to the public.
- Shop around: Don’t rely on your existing bank or lender alone. Use comparison websites, check high street banks, and look into specialist lenders that focus on self-employed or contractor mortgages.
- Check the overall cost, not just the rate: A low interest rate might look attractive, but factor in any arrangement fees, legal costs, or early repayment charges. The best deal is often the one with the lowest total cost over the full term.
- Get your paperwork in order: Make sure your accounts, tax returns, and business records are all up to date. Lenders will want to see consistent, well-documented income, and having everything ready can improve your chances of approval.
- Maintain a strong credit profile: A clean credit history will help you access the most competitive deals. Check your credit report before applying and fix any issues that might hurt your score.
By combining careful research, solid preparation, and expert advice, you can find the best mortgage deal to suit your self-employed circumstances and save money over the long run.
FAQs
Yes, but it can be more challenging. Lenders often require at least two years of income records. However, some specialist lenders might accept just one year’s accounts if your income is strong or if you’re continuing the same line of work you did previously as an employee.
Being self-employed doesn’t automatically mean you’ll pay higher interest rates. Interest rates depend mainly on your credit history, the lender’s criteria, and the perceived stability of your income. A solid financial record can help secure competitive deals similar to employed borrowers.
Most lenders don’t rely solely on income projections because they prefer actual historical financial records. However, certain specialist lenders may consider reliable future contracts or projected income if supported by credible documentation from an accountant.
No. Remortgaging itself won’t harm your credit score. The lender will run a credit check, which appears on your record, but this typically has minimal impact. Only multiple repeated checks over a short period could slightly lower your score.
Not necessarily. Contractors often have clear documentation through invoices and ongoing contracts, which lenders generally accept. Specialist brokers or lenders familiar with contracting roles might offer even smoother processes.
No. Self-certification mortgages were banned by the Financial Conduct Authority (FCA) after the 2008 financial crisis. Self-employed borrowers must now provide evidence of income to lenders.
Yes, if you have sufficient equity in your property. Remortgaging can release equity to invest in your business. Always carefully consider this option and speak to a financial advisor to understand the risks involved.
Most UK lenders prefer at least two years of financial records when you’re self-employed, but some specialist lenders might accept applications with just one year’s accounts. If your business is relatively new, working with a mortgage broker can help you find lenders willing to be flexible.
If you’re a director of a limited company, lenders typically consider your personal salary and dividends when calculating your affordability. Some lenders may also consider your share of company profits. Providing certified accounts or SA302 forms prepared by an accountant can streamline this process.
To remortgage when self-employed, you’ll typically need at least two years of accounts, tax returns, and bank statements showing regular income. Checking your credit score, speaking to specialist brokers, and selecting a lender familiar with self-employed borrowers can also help you secure the best deal.
Yes. Contractor mortgages are available, and many lenders have products tailored specifically for contractors. Lenders typically consider your contract rate, the length of your current contract, and overall work history rather than traditional employment income, making the process quite straightforward.
Remortgaging typically takes between four to eight weeks from start to completion. This can vary depending on the complexity of your financial situation, your preparation with paperwork, and the lender’s speed in processing your application.
Being self-employed doesn’t necessarily mean you’ll pay higher mortgage rates. Rates depend primarily on your credit history, income stability, and the lender’s criteria. If your financial records show a steady income and good credit history, you should have access to competitive mortgage rates similar to employed borrowers.
If you’ve already secured a mortgage after becoming self-employed, remortgaging in the future may be easier. Having previous approval demonstrates your financial reliability to lenders, making them more comfortable with your application. Still, you’ll need updated financial documentation to confirm your continued affordability.
If you haven’t been approved for a mortgage since becoming self-employed, you may face more scrutiny from lenders. However, this shouldn’t deter you. Ensure your financial documents clearly demonstrate consistent earnings, and consider speaking with specialist lenders or brokers who specifically cater to self-employed individuals.
Most lenders calculate earnings based on your average annual income from the past two or three years. For sole traders, lenders typically look at net profit. For limited company directors, lenders usually consider salary plus dividends or your share of company profits. Contractors typically have their income assessed based on their daily or monthly contract rates.
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