Wednesday 08 November 2017

I’ve just become self-employed – should I switch my mortgage?

Author: Editorial Team

Should I switch mortgage?

Mortgage providers go to great lengths to ensure the people they lend to can afford their repayments. From checking details of salaries and savings, to going through bank statements to monitor an applicant’s spending habits, lenders have tightened up their rules in the last few years to prevent repossessions and improve their lending practices.

If your financial circumstances change, there’s a good chance your mortgage provider will want to know about it. If you’re moving from being employed to self-employed, there’s a good chance your income will take a hit. In some cases, this could have an impact on your mortgage repayments so before going self-employed it would be advisable to have a good savings balance to cover any shortfall in income while the business is being grown.

Becoming self-employed when you have a mortgage agreement in principle

If you were employed when you received your mortgage agreement in principle, or even your final mortgage approval, but have since gone freelance, you should notify your mortgage provider. In these early stages of securing a loan, the lender will want to know everything about your financial situation and if you don’t disclose your new employment status, you would be in breach of your mortgage conditions. In some cases, the mortgage provider will want to reassess your ability to meet your repayments. This could mean they withdraw the offer altogether.

Becoming self-employed when your mortgage is already in place

Once your mortgage is in place, the rules are a little less clear. As Freelance UK says:

“The general interpretation is that changing jobs, going self-employed or freelancing won’t affect the ability of you, the borrower, to pay, so unless you think it will, there is no need to notify the lender.”

However, if you think your change in employment status will impact on your ability to meet your repayments, you may need to consider letting your mortgage provider know.

Most banks will work with borrowers to make repayments affordable in order to avoid repossession. If your initial fixed term period is coming to an end, you’ll probably need to tell your lender about your self-employed status before you can remortgage. In some cases, you may find you get a better deal by switching to another product offered by your current provider or even to a different mortgage provider altogether.

Check the small print

As each mortgage provider has different rules and guidelines, it’s important to check the small print of your mortgage agreement whenever your financial circumstances change. Staying within the terms of your agreement will help to ensure you stay on the right side of your mortgage provider and that you don’t breach the terms of your loan.

To find out more about applying for mortgages when you’re self-employed, get in touch with a member of our expert team today.

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Written by: Editorial Team