May 1st 2017

Re-mortgaging is not so straightforward for the self-employed, Kenny Logan takes a closer look.    

The rising trend for self-employment now equates to more than 10 per cent of the employed population in the UK. Given the fact that there are now 4.6 million self-employed people in the country, you might think that lenders would be well equipped in setting up and arranging loans, mortgages and re-mortgages.
But when it comes to re-mortgaging in particular for the self-employed and if for example, you are looking to release cash to reinvest in your business or to meet a one-off business expense, this has become much more difficult and expensive. Undoubtedly because of the credit crisis, criteria from lenders are now extremely stringent and the financial regulations which were introduced have made lenders very wary about lending to anyone who could be seen as a risk.  It seems that the large high street lenders have retreated from offering remortgages at reasonable rates for self-employed people, which means that more bespoke lenders have stepped in.

But if you are self-employed and looking to re-mortgage, we would advise that the sooner you can start the process the better as it can take time to find the best deal. The process is certainly not straightforward if you are self-employed because it is much more difficult to prove your long-term income to the lender, the consistent earnings and savings that give a traditional loan its strength is lacking from a self-employed loan file.

Because of this, you will be asked to provide the following by the lender:

Business accounts – Preferably you will need to show three years’ worth of accounts, though two can be enough, usually signed off by a chartered accountant.


Tax returns  – If you aren’t able to show business accounts then two or three years’ worth of tax returns are the next best option for you. You will be assessed on net profits and not turnover. While this can work for those in established businesses, it could mean that if you’ve become self-employed since getting your last mortgage and it’s a recent change, that you simply won’t be able to re-mortgage.

Here are a few other helpful tips to keep in mind when looking to remortgage your home as a self-employed borrower:

1. Choose a standard loan
If you can provide 2 to 3 years of financial records, then you should choose a standard loan for better pricing and loan terms.

2. Build up your equity
You should build up your equity in your property as this will give strength to your loan file.

3. Keep a good credit record
Do take care of your credit record as a good credit history will demonstrate your credit worthiness.

4. Income should be reasonable to your profession
Make sure that the income stated on the application is reasonable for your profession, although income on the application is declared rather than documented, the information about your income does still have to be logical.

5. Good record keeping
Always keep good records and be sure to obtain the proper licenses and certifications required as a legitimate business entity.

6. Is a variable payment an option?
Assess whether your income can withstand a variable payment, and if so take advantage of a tracker remortgage or other flexible repayment option.

As you will see, the process of re-mortgaging is not nearly as straightforward for the self-employed borrower and if you are looking to unlock money in this way, we can certainly advise you on the best course of action to take in your circumstances and of course provide you with the necessary business accounts or tax records as required.

We hope that this article is useful to you and if you are looking to re-mortgage, do contact one of the team at JRW who will be more than happy to help.

JRW Chartered accountants in Edinburgh, Galashiels, Hawick, Langholm and Peebles.