By Matthew Horan CeMAP · Mortgages
Quick answer: Being self-employed doesn't stop you re-mortgaging. Lenders just assess your income differently, usually using your tax returns or accounts rather than payslips. If you know what they'll ask for and prepare it early, the process can be much smoother. Clarity Mortgages & Protection in Altrincham gives fee-free advice, with no obligation.
If you run your own business, work as a sole trader, are a company director or contract through your own limited company, you may have been told that re-mortgaging is harder for you. Or you may simply expect it to be.
It does work differently. But lots of self-employed homeowners re-mortgage successfully every year, and the difference is often down to preparation and choosing the right lender.
Here's what lenders look at, what paperwork to have ready, and the common stumbling blocks to avoid.
How lenders view self-employed income
With an employee, a lender can look at a payslip and see a regular figure. Self-employed income can go up and down, so lenders want to see a track record.
The way your income is calculated depends on how you're set up:
Sole traders and partners are usually assessed on net profit, as shown on your tax return.
Limited company directors are often assessed on salary plus dividends. Some lenders will also consider your share of the company's retained profit, which can help if you leave money in the business.
Contractors may be assessed on their day rate, or on their previous tax years, depending on the lender.
Most lenders will average your income across the last two or three years. Some will use the most recent year or the lower of two years, which is one reason it matters which lender you apply to.
What paperwork will you need?
Every lender is different, but you can expect to be asked for some or all of the following:
SA302s and tax year overviews from HMRC for the last two or three years
Accounts, or an accountant's certificate or reference confirming your income
Business and personal bank statements, usually for the last three to six months
Proof of ID and address
Details of your existing mortgage, including the balance and your current deal
If you're a limited company director, you may also be asked for company accounts and your payslips or dividend vouchers.
Getting these in order before you start can save a lot of time. If your tax return was submitted late, or you haven't yet filed this year's, that's worth telling us about early.
Do I need two years of accounts?
Many lenders do like to see two full years, but it isn't always essential. Some lenders will consider one year's figures, usually if you've been in the same line of work for some time beforehand, for example if you were employed in the same field before going self-employed.
If you've been self-employed for less than two years, it doesn't mean you can't re-mortgage. It does mean the choice of lender matters even more, and nothing is guaranteed.
Common stumbling blocks
A few things come up regularly with self-employed clients:
Your income has dropped. If your most recent year was lower than the one before, lenders may average the two or use the lower figure. Timing can matter.
You've kept profits low for tax reasons. Smart tax planning can reduce what you owe, but it also reduces the income a lender can use. It's worth thinking about this before you apply.
Tax owed to HMRC. If you have an outstanding tax bill or are on a payment plan, lenders may ask about it.
Mixed personal and business spending. Keeping the two separate makes your bank statements easier to read.
Credit issues. Self-employed people aren't any more likely to have adverse credit, but if you do, it can make the process harder. If that's you, our post on adverse credit and mortgages explains how lenders see it.
Product transfer or re-mortgage?
When your fixed rate ends, you generally have two routes: stay with your current lender on a new deal (a product transfer), or move to a new lender (a re-mortgage).
A product transfer often involves fewer checks, and some lenders don't ask for new income evidence at all, which can be convenient if your income has changed or your paperwork is not up to date. But your current lender's rates may not be the best available, and the comparison is worth making.
A re-mortgage to a new lender means a full assessment, including your self-employed income. That can open up better rates, or let you borrow more, but it's a bigger piece of work. We look at both and explain the trade-offs. You can read more in When should you re-mortgage? Six moments that matter for Altrincham homeowners.
Why a whole-of-market broker helps
Self-employed income is where lender differences show up most. One lender may average three years, another uses the latest year, and another will take into account retained profit in a limited company. Some will look at your contract rather than your accounts.
A whole-of-market broker can:
Match you to lenders whose way of assessing income suits your situation
Check criteria before you apply, so you avoid unnecessary declines and credit searches
Help you present your income clearly, with the right documents in the right order
Compare rates, fees and terms across the market rather than one bank's products
That can make a real difference, though lender decisions can never be guaranteed.
Don't forget protection
When you're self-employed, there's no employer sick pay behind you. If you couldn't work through illness or injury, the mortgage payments would still be due. It's worth thinking about income protection alongside your remortgage. See Is Mortgage-Only Life Insurance Enough? for the gaps to look out for. We review mortgage and protection together.
Frequently asked questions
Can I remortgage if I'm self-employed?
Yes, in many cases. Lenders assess your income using your tax returns or accounts rather than payslips. The right lender matters, and nothing is guaranteed.
How many years of accounts do I need?
Many lenders ask for two years, though some will consider one, particularly if you've worked in the same field before. We can check which lenders fit your situation.
What's an SA302?
An SA302 is a summary of your income and tax from your self-assessment return. It's available from HMRC, and lenders often ask for it alongside a tax year overview.
My income dropped last year. Can I still remortgage?
Possibly. Some lenders average your income over two or three years, while others use the lower year. It depends on the lender, so it's worth speaking to us before you apply.
I'm a limited company director. How is my income counted?
Usually as salary plus dividends. Some lenders will also include your share of retained profit in the company. We'll check which approach suits you.
Is it better to stay with my current lender?
Sometimes it is, as a product transfer can be quicker with fewer checks. But it may not be the best rate. We compare both options for you.
Does it cost anything to speak to you?
No. We don't charge a fee for our advice.
If you're self-employed and your fixed rate is coming to an end, or you simply want to know your options, get in touch. It's fee-free with no obligation, and we'll tell you honestly where you stand. We help clients across Altrincham, Trafford and Cheshire.
About the author
Matthew Horan CeMAP is Principal of Clarity Mortgages and Protection, an independent, fee-free mortgage and protection broker based in Altrincham. He has over 10 years' experience helping individuals, families and business owners with mortgages and protection, and writes in plain English because most people aren't given the chance to understand what they're signing.
Your home may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it.
This article is general information, not advice. What's right for you depends on your own circumstances. Acceptance of an application depends on the lender's criteria and is not guaranteed.
