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Remortgaging with Non-standard Income Streams

Which types of earnings are considered non-standard by remortgage lenders, and what difference does it make to your remortgage eligibility assessment?

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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Remortgaging with Non-standard Income Streams

Applying for a remortgage can be straightforward; and is a great way to cash in on your equity, save money, and consolidate debts.

However, one of the most common barriers is having a non-standard income, which can make the process more complicated.

While a mainstream mortgage lender and high street banks might favor employed applicants, there is a world of niche lenders and specialist providers - many working solely through experienced brokers - who have the flexibility to structure a remortgage around any number of scenarios. Maybe you can become eligible to get a joint mortgage where the income of 2 applicants will join.

You might have struggled with a competitive remortgage quote if you fall into any of these groups:

  • Self-employed
  • Earning low wages
  • Facing potential redundancy
  • Earning variable income
  • Multiple employments
  • Contractors and CIS workers

Here the Revolution Brokers team runs through the need to knows when it comes to remortgaging with a non-standard income - but if you need any further assistance or want to get started with remortgaging, give us a ring on 0330 304 3040 or drop us an email to [email protected].

Can I Remortgage if I am Self-Employed?

You can, yes. Some mortgage brokers might find it difficult to lend to self-employed applicants, and even if you're applying to remortgage with the same lender, if you've switched to running your own business from being employed, they might not be able to help.

Never fear - an expert broker will be able to present several options, often at better rates than a high street provider would be able to offer.

AboutAbout your mortgage
Single or joint mortgage?
What’s your yearly income?

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about your mortgage

Based on your yearly income,
you may be able to borrow

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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

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Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

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How do I Prove my Income as a Self-Employed Remortgage Applicant?

This factor is the biggest stumbling block; you need to demonstrate how much you earn to comply with affordability criteria.

If you aren't on payroll, your income might not be that straightforward.

Usually, you can:

  • Provide two to three years of business accounts.
  • Apply to a lender who accepts two years of accounts.
  • Work with a broker to apply to a specialist lender who can lend to self-employed people who haven't yet reached their first year of trading.

There are also exceptions; if you are a professional, such as a doctor or dentist, most mortgage lenders can lend to you even if you don't have much trading history, provided you meet the other criteria.

Ways to Demonstrate Self-Employed Income:

There are a variety of ways you can prove your income:

  • Self-assessment tax returns (SA302s)
  • Filed business accounts
  • Payslips
  • Rental income is demonstrated by a tenancy agreement and private banks statements in some scenarios for landlords.

Can I Apply for a Remortgage if I am a Freelancer?

You can indeed - as a freelancer, you will fall into the same category as a self-employed person when it comes to remortgaging.

Can Freelancers with Fixed Contracts Get a Remortgage?

If you work on fixed contracts, there are definitely providers who can lend to you. The best scenario is where you have a contract that has already been renewed once or more, or you have a contract with another six months left to run.

Professionals with more extended work experience are better placed to apply for remortgages. However, the key is how much you earn and proving the sustainability of your income.

Which are the Best Remortgage Lenders for People who are Self-Employed?

 

Self-employed mortgages are not a standalone product. Instead, this type of mortgage is a standard residential product that has been tailored to your variable income stream.

The most important thing to make sure you get the best interest rates is to meet as many criteria as possible; these will include things like:

  • Your credit score.
  • Your age.
  • Your income.
  • Your equity value.

Some lenders also consider what sort of self-employed job you have. For example, sole traders and company directors might both be self-employed but have different criteria from the same remortgage lender.

It is always best to contact an independent, whole-of-market broker such as the mortgage brokers team to work out which the best lenders are to apply to, and where the most attractive rates can be found.

How Much Can I Borrow Through a Remortgage as a Self-Employed Person?

The maximum remortgage value depends on what you earn. Lenders will use different calculations to work out what they can lend to you:

  • Sole Traders: most lenders consider your average net profit over the last three years. Some can consider just the previous year's profit if your business has grown and you have earned significantly more in the last 12 months.
  • Limited Company Directors: income includes salary and dividends, with some specialist mortgage providers including your share of retained company profits.
  • Contractors: usually, this calculation looks at your day rate or the total contract value. For day rates, this is multiplied by five days per week and on 46 weeks per year to give an average annual steady income stream.

To work out roughly how much you can borrow, you can multiply your annual earnings by 4.5. Some lenders set a maximum cap as high as five or six times your annual income, depending on other circumstances around the mortgage application.

Here is an illustration of what maximum remortgage you might be offered as a contractor earning £200 per day:

Lender Income Multiple

Maximum Remortgage Value

4.5 x annual income

£207,000

5 x annual income

£230,000

6 x annual income

£276,000

This is an indication, but other factors such as your equity value will also make a difference. The key is to apply to a lender with experience in the self-employed sector that will take a favourable view on your application.

Can Self-Employed Applicants Remortgage a BTL Property?

Yes, you can - although if you are switching from a residential competitive mortgage to a BTL, then you'll need to meet minimum income thresholds.

Some lenders dictate that you need to earn £25,000 per year for a BTL remortgage, others have a minimum of £20,000, and others £15,000. The crucial factor is that the rental income will cover the mortgage payments.

As a self-employed person switching a mortgage to buy to let, your income matters less than the projected rental income.

I am on a Zero Hours Contract - Can I Get a Remortgage?

You can, but it is vital to work with a broker to identify the best mortgage lenders. Many high street providers will not offer a remortgage if you work on zero-hours contracts.

Here are ways to strengthen your application:

  • Demonstrate at least one year of work experience.
  • Provide at least one year's worth of payslips and a P60.

Some of our niche lenders will lend to zero-hours contract workers, even if you don't have a year's history, so there are always options out there, in addition to the remortgage options available through mainstream and high street lenders.

Is it possible to get Mortgages For Low Income?

Salaries do change over time, and yes, you can secure remortgage lending even on a low income.

If a mortgage broker has rejected you as you don't meet their income requirements or affordability criteria, give the Revolution team a call on 0330 304 3040, or check our mortgage affordability calculator if you decide to get a mortgage.

You may be eligible to get a lifetime mortgage which is a type of equity release product that allows you to borrow a lump sum against your home.

Do I Need to Earn a Minimum Amount to Get a Remortgage?

Not necessarily. Some lenders do have a minimum of £20,000, and others have a lower limit. However, it is more important that you can prove affordability than meeting a notional minimum level.

How Can I Get the Best Remortgage If I am on a Low Income?

The best way to achieve a better rate is to look for other income sources or assets that will supplement your income and achieve a lower LTV ratio.

How to Use Benefits in a Low Income Remortgage Scenario

As an example, some providers will consider benefits as part of your income when considering whether to approve a remortgage application. This can include:

  • Attendance Allowances
  • Carers Allowances
  • Child benefit monthly payments
  • Child tax credits
  • Disability Living Allowances
  • Incapacity Benefits
  • Industrial Injuries Benefits
  • Maternity Pay
  • Pension Credits
  • Severe Disablement Allowances
  • Widow's Pensions
  • Working tax credits

Some specialist lenders will also accept 100% of your benefit income as part of your annual earnings.

How to Use Assets to Supplement your Remortgage Income

Another option is to bolster your income with assets. Here are some examples:

  • Investment Property: If you have buy to let properties, you can access equity from those homes. A remortgage will be based on rental incomes, not your own annual earnings.
  • Stocks & Shares: If you have investments, you can use them to support your remortgage without having to sell them. An assessor will establish their value, and loan the total amount usually up to 50% or 60% Loan to Value.
  • Cash Savings: Like investment holdings, a savings asset can be loaned against up to 70% or 80% Loan to Value.
  • Other Assets: In some cases, you can use other valuables or assets to secure your remortgage.

In any of these situations, you must apply to a lender with the flexibility to consider your other income or assets in the remortgage application.

Can I Apply for a Remortgage as an Unemployed Person?

This is a difficult, but not impossible scenario - and there are ways to make your application acceptable, even if you have lost your employment.

Guarantor Mortgages for Unemployed Applicants

One option for unemployed people seeking to remortgage is to ask a close relative to act as a guarantor. They would need to sign an agreement, and be willing to be liable for the debt if you don't keep up with the monthly repayments.

Another option is to ask a guarantor with significant savings to transfer cash into a savings account with the lender. This is held in situ as a back-up reserve until the lending is repaid.

If you are unemployed, you are likely to receive benefits. This income, along with a guarantor, can mean a specialist lender is far more likely to be able to support your remortgage application.

Can I Remortgage if I Might be Made Redundant?

Redundancy is an unfortunate and challenging time, and remortgaging might seem impossible, but can make the situation less stressful by reducing your monthly costs.

When remortgaging in a redundancy scenario, it is crucial to work with a broker who can negotiate specific terms around your situation.

If you are sure that you are going to be made redundant, you must let a new lender know.

What Can I Do if I Have Been Rejected for Remortgaging Due to a Redundancy?

Mainstream lenders are often unable to help applicants who have been made redundant, simply because the risk level is too high.

If you have redundancy pay and are living on savings and benefit income, the first thing to do is to contact your lender. Often an interest-only switch might help reduce the pressure until you can find a new job.

You can also ask to extend the mortgage term to reduce your mortgage repayments until things become more manageable.

There are also government schemes to support homeowners in redundancy - these are usually called mortgage rescue schemes or mortgage interest schemes on the mortgage market.

Alternatively, you can apply through specialist lenders who have products created to help you cope in redundancy, so contact the Revolution team if you are struggling, and we will walk you through the best options.

What are the Eligibility Criteria for Non-Standard Income Remortgages?

Every lender will work through an eligibility checklist for you to get a mortgage considering factors such as:

  • Your age and credit report rating.
  • How much deposit you have.
  • Your income and expenses.

Professional Advice for Remortgaging with a Non-Standard Income

If you are seeking a mortgage approval with non-standard employment, or need support finding alternative mortgage options in a situation that mainstream lenders cannot support, the Revolution team is here to help.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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