6 Remortgaging Tips for Self Employed Borrowers
As homeowners move through various employment cycles, many of them leave a traditional career in favour of the freedom and flexibility of self employment. This change in a homeowner’s source of income could easily exclude that homeowner from traditional mortgage programs. Fortunately, there are remortgage types designed especially for self employed homeowners too.
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Get a Quote »Who is Considered Self Employed?
Many people are deemed as self employed when it comes to lender guidelines. This includes sole proprietors, as well as individuals who own a significant share of a business. Other careers that fall into the self employed category for loan qualification purposes are independent contractors – including those who work in or on behalf of other businesses.
Musicians, artists, dancers, beauticians, photographers and consultants are just a few of the careers where a person might be self employed. Other people who could fit self employment remortgages parameters are people who work multiple jobs or receive income on a seasonal or infrequent basis.
Typical Self Employed Financing Challenges
While getting a home loan could be challenging for anyone, it has the potential to be especially difficult for a self employed borrower. The consistent earnings and savings that give a traditional loan its strength are often lacking from the self employed loan file. Other challenges include the ability to receive an independent third-party validation of loan application data such as:
- The existence of the business including its legal name, address and phone number
- The income source, including how much and how often
- The probability of the continuance of income for the next 3-5 years
- The accuracy of reported instalment sale or gross rental income
Remortgage Solutions for Self Employed Borrowers
Banks and direct lenders may provide a loan for a self employed borrower. However, a mortgage broker may give you the best picture of what is available. The Self Cert Remortgage program can be a workable solution for entrepreneurs who would otherwise be left with few options. With this type of remortgage, the applicant can simply declare their income without providing the extra supporting documentation. This loan does come with a few limitations, including lower loan-to-values and higher interest rates than standard home mortgage loans.
Here are a few other helpful tips to keep in mind when looking to remortgage your home as a self employed borrower:
1. If you have the ability to provide 2-3 years of financial records, choose a standard loan for better pricing and loan terms.
2. Build up your equity in your property. It will give strength to your loan file.
3. Take care of your credit record. A good credit history will demonstrate your credit worthiness.
4. Make sure the income noted on the application is reasonable for your profession. Even though income on the application is declared rather than documented with paper, the details still have to make logical sense.
5. Always keep good records, even if you plan to do your loan under a special program.
6. If your income can withstand a variable payment, take advantage of the tracker remortgage or other flexible repayment options.
In addition to the helpful tips above, be sure to obtain the proper licenses and certifications required to make you a legitimate business entity.