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Self Employed Remortgage: Everything You Need to Know

Self Employed Remortgage: Everything You Need to Know

Being a freelancer, owning your own business or primarily working on a commission only basis, can be a wonderful way to earn a living. Not only will you work at doing exactly what you love, but you will most likely also have the flexibility needed to take a vacation or take on more work if you need to earn extra money.  However, just as owning your own business and being self employed can be empowering, it can also be a downfall when you need to remortgage your home. Self employed remortgage can be a very daunting process.

The main reason for this is that people who are self employed usually are given a hard time by their financial institution to prove their financial worth. A self employed remortgage will ultimately be based on how much money your business earns. Unfortunately, most financial institutions charge self employed remortgage interest rates that are almost on par with that of someone who has bad or poor credit, regardless of whether or not the self employed person has ever suffered any type of financial loss.

Application Process

When considering applying for a self employed remortgage, it is wise to think about how you are going to be able to prove your finances. Most financial institutions require a minimum of three years bank statements and audited accounts. If you have only recently started your business or become self employed, this requirement can be a hindrance; especially if you are considering a self employed remortgage to help fund your business expenses and grow your company, or to consolidate any debt that you may have.

In order to get a self employed remortgage most, if not all, of your assets will need to be evaluated to determine their value.  The majority of lenders will not lend over 75 percent of the value of the property. If you have plenty of equity that you have built into your home since you first mortgaged it or bought it, this percentage won’t be a problem. However, if you do not have much equity in your home or other assets, then finding self employed mortgage that you can live with may be a bit harder to find and you will need to do more research. Every self employed mortgage application will require you to produce documents ranging from mere receipts for purchases made for your business to any other loan documentation. Some bankers will also require you to show them your company’s business plan and Articles of Incorporation, if they pertain to your self employed status.

Proving that you do indeed have an income can be quite hard, especially when you no longer work for a large corporation where you would normally receive a weekly pay stub or a direct deposit of your salary into your bank account. One way to avert this problem before you apply for a self employed remortgage is to hire an accountant or bookkeeper to do your books for you. They will be able to advise you on what steps to take and what paperwork you may need in order to have a successful self employed remortgage application.

Other Options

There are quite a few mortgage loan companies that offer a self certification mortgage. For this type of mortgage, the self employed applicant is asked for an estimation of their yearly income. Do not think of this type of application as a guarantee of being awarded a self employed remortgage. There are many other factors that the loan company will need to consider as well, such as your credit rating. Whilst your credit rating does not necessarily need to be excellent, it should be without any major flaws.

Interest Rates

The interest rate of a self employed remortgage may be a little higher than the remortgage rate of someone who is not self employed. By doing your research and interviewing multiple mortgage and loan companies, you may be able to find a great rate. You can locate such companies by doing a simple online search using the search terms ‘self employed remortgage’. Alternatively you can also talk to other freelancers and self employed business associates to find out which company they have used in the past.

Photo courtesy of C y r i l l i c u s.

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