There’s no denying that if you’re self-employed, you’ll likely have to jump through extra hoops to organise your remortgaging application.
Brexit has, in any case, meant a tightening of lending criteria generally. This is probably because lenders are unsure how the housing market will react post-Brexit.
This is despite there being more self-employed people in the UK than ever. The gig economy, remote working and an entrepreneurial spirit mean the numbers are increasing.
According to data published in June last year by the Office for National Statistics, the number of people registered as self-employed is on a steady rise.
It says: “The rapid growth of self-employment has been a pronounced feature of the UK labour market in recent years. The number of self-employed increased from 3.3 million people (12.0% of the labour force) in 2001 to 4.8 million (15.1% of the labour force) in 2017.”
Lenders do tend to be more cautious about making their products available to the self-employed. This is a hangover from the Credit Crisis and the different financial regulations that followed it. It is also because the financial situations of self-employed people can be less straightforward than those on PAYE.
Employed people can produce pay slips to prove income. Self-employed people, however, often don’t have a steady monthly income they can show to lenders.
So what can You do to Streamline the Remortgaging Process if You’re a Freelancer or Self-Employed?
1. Know that there’s no such thing as a ‘self-employed mortgage’. You will be applying for a normal mortgage. You will have, however, to do more to prove your income than someone who is on a company payroll. The reason for this is there’s no third party employer to vouch for your wages.
2. Don’t ask for a self-certification remortgage. Before the credit crunch in 2007, self-employed workers could apply for a ‘self-cert’ mortgage. The days of the old self-certification mortgages ended officially in 2014.
3. Don’t assume you won’t be able to get a remortgage if you’re self-employed. If you have mostly dependable earnings, and good records, you can still arrange a good-value deal.
4. Don’t apply for a remortgage if you’re new to self-employment. In general, the longer you’ve been self-employed, the better. Ideally, you will have two years of accounts. With three years-worth, you’ll have even more options.
5. Make sure you have:
- Two years’ accounts
- A chartered accountant
- A track record of regular work
- A healthy deposit
Below are Some More Pointers to Keep in Mind when Applying for a Remortgage as a Freelancer
6. Make sure your credit history is solid. A clean credit record will boost your chances of getting a mortgage. This is the same as for anyone on PAYE. So, make sure your credit report is accurate, up to date, and in the best shape possible. Simple omissions such as failing to sign on to the electoral roll and having missed a credit card payment can lead to a poor score. Check your credit score with one of the credit rating agencies for free.
7. Try to build up a solid deposit or lower loan to value. As with any other borrower, it will boost your chances of being accepted for a mortgage. If you have a decent deposit or sum of equity in an existing property, you’ll be looked upon more favourably.
8. Have your accounts up to date and as thorough and detailed as possible. Get these supplied by a chartered accountant so your lender can be confident they are accurate. Typically, a self-employed person looking to remortgage should show at least two years’ worth of company accounts, SA302s or tax returns. The SA302 is a form from HM Revenue & Customs which provides evidence of your earnings for the last four years, based on your self-assessment tax return.
9. Do use a mortgage advisor. An experienced broker can give you a lot of specialist help. Many brokers have direct access to the underwriter to talk through your situation before you submit your application. When you’re self-employed you can have different business set ups. You could be a partnership and share profit, a limited company or a sole trader. Each of these will require different types of consideration that a mortgage advisor can help with. He or she will also shop around for you, looking beyond the traditional large lenders to see what smaller, more bespoke lenders, can offer.
If you’re self-employed and need help in finding the right remortgaging product for you and navigating your options, we’ll be happy to help you here.