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Income Types and Remortgages

How will my income type impact my remortgage application? Get the right advice about this here.

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 18th March 2020 *

Remortgaging is often essential to ensure you remain on the most favourable rates or gain access to the equity you’ve accumulated over the years, and for some property owners, this is a relatively straightforward process. Others, however, run into barriers along the way, and this is especially true of those with non-standard income.

Those who are self-employed on low wages or facing redundancy might be able to relate to this, but the good news is that there are remortgage lenders out there who are willing to offer a lifeline to customers in all of these niche categories.

The following topics are covered in our guide to remortgaging on non-standard income…

Read on to find out more about obtaining a remortgage with non-standard income, or better yet, make an enquiry and one of the whole-of-market advisors we work with help you find the remortgage provider offering the best deals for someone in your shoes.

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Remortgaging when self employed

Remortgaging might not be so simple if you’re employment status has changed since you took out your initial loan. Maybe you’ve switch from a full-time job to self-employment, and as a result, a mainstream lender has turned you down for refinancing.

If this is the case, or you fear it might be, don’t panic. There are specialist remortgage providers out there who deal with people in this situation every day.

The only real difference between applying for a for a mortgage product as someone in self-employment is the way you need to evidence your income.

Proof of income for a self employed remortgage deal

This is where complications could arise if you approach a mainstream lender as they may find your financial situation difficult to assess since you’re not on a regular payroll.

To prove you have a steady income stream, the providers who offer self-employed remortgages may ask to see three years’ worth of accounts. 

If your accounts don’t stretch back that far, don’t worry. There are providers out there who will accept two years, and others who will offer loans to self-employed customers with just 12 months’ worth (some even less than this for professions such as doctors and dentists), as long as they pass their general eligibility checks.

Ways to prove income for a self employed remortgage

Lenders who offer remortgages to self-employed borrowers will generally accept the following as proof of income…

  • SA302 self assessment tax returns (now online only)
  • Finalised accounts
  • Pay slips from your own company/family company
  • Some lenders may also accept proof of rental income via a tenancy agreement and bank statements, if you’re a landlord

What if I have no proof of income?

Then getting a mortgage may prove difficult. Self-employed customers will need at least some proof of their income in order to be approved for a mortgage.

As we've already covered, there are lenders who offer mortgages to self-employed professionals with just one year or less of accounts, so your best bet might be to delay your application slightly if you have no accounts.

The minimum amount of accounts you're likely to need is nine months, and with only the bare minimum to declare, a strong track record in your industry and having clean credit is likely to help your cause.

If you're looking for a mortgage but don't have any proof of income, make an enquiry. We'll introduce you to a broker who can give you the right advice about how long you will need to have been trading for before applying, as well as suggest potential alternative options.

Remortgaging as a freelancer

From a UK tax standpoint, freelancers fall under the self-employed umbrella, as ‘freelance’ is not a formal legal status in its own right. If you’re a freelancer, then all of the above about self-employed remortgages is relevant to you if you’re seeking to refinance a property.

Can I remortgage if I’m a freelancer on a fixed-term contract?

If you’re on a fixed-term contract, there are certainly lenders who would be willing to consider you for a remortgage - but you will stand a better chance of approval if your contract has been renewed at least once or has more than six months left to run.

Being in the same line of work for a lengthy period may also be preferable to some lenders, but the most important thing to remortgage providers is how much you earn and how sustainable that income is.

What are the best remortgages for self employed applicants?

Technically speaking, there is no such thing as a ‘self employed remortgage’ as the mortgage products you can apply for as a self-employed professional are no different than those in full-time employment - the only thing that really sets you apart is that you must evidence your income in a specific way, as we’ve already discussed.

The key to getting the best rates is meeting the lender’s eligibility requirements, and this is where factors such as your credit score, age, income and amount of equity come in.

It may also depend on what kind of self-employed worker you are. Most lenders will calculate your earnings differently if you’re a sole trader or Ltd company director, for example.

Furthermore, you should speak to a whole-of-market broker to ensure you have access to all of the best deals that you qualify for. Make an enquiry here and we’ll connect you to one.

So how much can I borrow on a remortgage if I’m self-employed?

Following on from what we’ve just covered, lenders will assess your income and calculate how much you can borrow differently depending on what type of professional you are. For instance…

  • Sole traders: If you’re a sole trader the lender would use your net profit (often average over the last three years, although some will use most recent, which can be higher and thus result in a larger remortgage loan)

  • Ltd company directors: Most lenders consider salary plus dividends, but some will look at the share of retained net profit if this is higher and offer a larger loan amount

  • Contractors: Most lenders will look at either the total contract value, or your daily rate. If it’s the latter, lenders tend to multiply this by a five-day week, and the number of working weeks in a year (typically 46-48 weeks) to calculate your annual income.

For a ballpark figure reflecting what you might be able to borrow on a remortgage, multiply your income by 4.5, as this is the cap providers typically impose, although some will go as high as 5-6 times your earnings under the right circumstances.

The table below will give you an idea of what kind of remortgage loan might be offered…

Example: Daily rate = £200 x 5 days x 46 weeks = £46,000 per year

Income multiple cap Maximum loan
4.5x income £207,000
5x income £230,000
6x income £276,000

Of course, this figure will vary depending on other factors, like how much equity you hold but the important thing to remember is that it’s vital to find a lender who specialises in customers with your income type. 

Get in touch and the whole-of-market remortgage brokers we work with will help you track down the best deals.

Can I remortgage to buy to let if I’m self employed?

This is certainly possible, though minimum income requirements can be higher for remortgage borrowers who are hoping to switch from residential to buy to let. 

At some lenders it’s £25,000 or higher, but others will accept self-employed professionals on £20k and a number will even cater for those on £15,000 or lower, providing their buy to let investment is viable, i.e. will generate a certain amount of rental income.

If you’re self employed and aiming to remortgage from residential to buy to let, most lenders will be more interested in whether the rent will cover the new mortgage, and less concerned about how much income you’re able to evidence.

Can I remortgage if I’m on a zero-hour contract

Yes, but no every lender will be okay with this. Some lenders do not cater for remortgage borrowers on zero-hour contracts at all, but others would be happy to do so, with caveats. It may boost your application if the following applies to you…

  • You have at least 12 months experience working on a zero-hour contract
  • You have a minimum of 12 months’ worth of payslips and a corresponding P60

There are even a select few lenders who would cater for remortgage customers with less than 12 months’ experience as zero-hour contract worker, so don’t be put off if you’ve been in your job for under a year.

It’s also worth pointing out that zero-hour contract workers generally have access to the same remortgage rates as professionals on standard full-time contracts, providing they meet the lender’s eligibility requirements.

If you’re on a zero-hour contract and seeking a remortgage, get in touch and the whole-of-market advisors we work with will connect you with the lender offering the best deals for customers in this employment situation.

Can I get a remortgage on low income?

We often hear from customers who want to know whether remortgaging with lower income is possible. There are a number of reasons why someone’s salary may have taken a dip since they took out their original mortgage, and if you’re in this boat, the good news is that there are lenders out there who may be willing to offer a low income remortgage.

Minimum income requirements for a remortgage

Most lenders are more concerned about the affordability of the remortgage loan than the specific numbers on your wage slip. That said, some have a minimum income requirement of £20,000 per year, but at others it’s lower at £10,000-£15,000. However, it is not uncommon to find a lender who looks at the bigger picture and imposes no minimum.

Getting the best remortgage deal on low income

If your salary has fallen since you took out your initial mortgage, your chances of ending up on more favourable rates when refinancing might be lower, but workaround solutions could be available. The answer could be to supplement your income with other sources.

Supplementing a low income remortgage with benefits

For example, not all providers will accept benefits as a means of supplementing a remortgage application, but there are specialists out there who have no problem lending to borrowers who top up their wage using the following…

  • Child tax credit
  • Working tax credit
  • Child benefit
  • Disability Living Allowance (DLA)
  • Industrial Injuries Benefit (IIB)
  • Incapacity benefit (IB)
  • Attendance Allowance
  • Pension Credit
  • Maternity Allowance
  • Severe Disablement Allowance
  • Widow’s Pension
  • Carer’s Allowance

Moreover, a small number of lenders will consider accepting 100% benefits income.

Using assets to supplement a low income remortgage

Some lenders are happy for borrowers to supplement a mortgage application with the below to ensure that they end up on more favourable rates.

  • Investment properties: If you have one or more rental properties you can draw equity from, the remortgage deal you’re offered may be based on the rental income or rental market value of said properties, rather than your income.

  • Stocks, shares and pension funds: Those with significant investment holdings can put them towards a remortgage application without cashing them in by having a private bank assess their portfolio and hand them a percentage of the total back as a loan. These loans are typically offered at 50-60% LTV.

  • Cash: Works in much the same way as investment holdings but loans secured against cash savings are typically offered at the more favourable LTV ratio of 70-80%.

  • Other assets: In rarer cases, it may be possible to receive a loan secured against a valuable item you own, such as a vehicle or antique, and use it in conjunction with your annual earnings when applying for a remortgage.

If you’re seeking a remortgage on low income but have other sources of revenue, it’s vital you find a lender who will take said sources into account. Make an enquiry and the advisors we work with will help you find a remortgage provider who’s happy to deal with customers who wish to use assets or benefits to bulk up their application.  

Can I remortgage if I’m unemployed without income?

Many customers have also asked us “can you remortgage if you are unemployed?” and while you’re unlikely to pass a lenders’ affordability checks with no income whatsoever, there may be workaround solutions for property owners who have lost their jobs.

Guarantor mortgages

If you’re looking to remortgage when unemployed and have a family member who is willing to help you out, one option may be to switch to a guarantor mortgage.

This involves said family member either signing a legal agreement confirming that they will be liable for the repayments if you default, or placing a large sum of money into a savings account with the lender, which they are unable to withdraw from until a certain amount of the new mortgage loan has been paid off.

If you’re unemployed, the chances are that you have some form of income through benefits, and with the added security of a guarantor on your side, there may be a specialist lender out there who is willing to offer you a remortgage, providing you pass their other eligibility checks.

Should I remortgage if I’m facing redundancy?

Changing your mortgage terms might be the last thing on your mind if you fear a redundancy is coming - or know for a fact you’re being laid off - but it may actually pay to refinance before your circumstances change.

If done correctly, a remortgage will help you cut down your costs and make your monthly repayments more manageable when you’re living off your redundancy pay and any other benefits you may be entitled to or savings you might have.

It should, however, be stressed that it’s important to have access to the entire market when searching for a remortgage deal, as taking out the wrong one could cost you more in the long run. The advisors we work with have exactly that and can help you find the lender offering the best rates based on your personal circumstances and employment situation.

You should also bear in mind that once someone knows for definite they’re being made redundant, they have a duty to make any potential new lender aware of this, and remortgaging will be difficult for someone who has no other income or assets.

What to do if you’ve been turned down for a remortgage because of a redundancy?

Some lenders will be unwilling to offer you a remortgage if you’ve been made redundant as you may have become too high risk for them, but there could be options available.

If you’re worried about making your monthly payments on redundancy pay and benefits/savings alone, first contact your existing lender as they may allow you to switch to an interest-only deal until you’re in secure employment once again. This might add extra time to your mortgage term, but could make things more affordable in the short term.

You may also be eligible for government help, such as the support for mortgage interest scheme or, if you’re based in Scotland or Wales, a mortgage rescue scheme.

Finally, other borrowing options might be available through specialist lenders, so make an enquiry and one of the whole-of-market advisors we work with will discuss every available option and help you decide on what’s the best course of action.

What impacts eligibility for non-standard income remortgage borrowers?

Whether you’re freelance, on low income or recently unemployed, the following factors may impact on the remortgage provider’s lending decision.

You can find out more about how these factors could impact your mortgage application through the links in the list above or make an enquiry for more information.

Speak to an expert on remortgages for borrowers with non-standard income types

If you like anything in this article or you’d like to know more, call Online Mortgage Advisor, today on 0808 189 2301 or make an enquiry here.

Then sit back and let the non-standard income remortgage brokers we work with find the lender with the right expertise for your circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 18th March 2020
OnlineMortgageAdvisor 2020 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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