Self employed implications for re-mortage

martini75

Hi all I am currently in a safe job on a permenant contract working for the County Council. I took this job because I wanted to get a mortgage and reaslised that in the current climate it is important to show as much security as possible.

I have recently go the mortgage and new house, my plan now is to save up some cash as a financial cushion, then to leave my job a register with an agency, which will mean I am self employed, not stuck in a job I don't enjoy much and earning a lot more money. In the line of work I am in I don't think there will be too much of a problem getting contracts although I will have to be prepared to be flexible and travel more, but I concerned about paying my mortage if I am sick, so the plan will be to take out some sort of insurance for that.

My question is how difficult will be to re-mortagge once my fixed term runs out in Aug 2011? Basically I am try to do as much research as possible about the implcations of going self employed before I make the jump so that I am fully prepared.

Any advice is greatly appreciated.

apples1

We are self employed. The standard requirement is that you can show three years (or more) accounts as well as lots of other things like last 3-6 month bank statements etc.

We had just less than two years accounts and London & County broker found us a mortgage co who would look at our individual circumstances and as they were good got us a very competitive mortgage offer. Your only other alternative is to stay with your current lender who would not look into your changed circumstances as long as you were all up to date with current mortgage payments.

Ironically after going to so much trouble to get a mortgage offer elsewhere when my 5 year fix ran out last month I have now decided to stay on my current lenders BMR!

Mrs_Bumble

An Income Protection (PHI) policy to cover you for long term sickness will provide better value for money than an MPPI policy, speak to a local independent mortgage/financial adviser.

In relation to remortgaging in 2011, as apples1 has said above you will need a minimum really of 2 years accounts and obviously show an income on these that will mean that the mortgage is affordable, lenders will either use an average of the 2 years or the last years figures whichever is lower - well in the current market, so if you prepare yourself for that then you won't get any surprises.

martini75

Thanks for the feedback. I am planning on going self employed in Aug 2010, I will therefore only have my self employed accounts for one year, will this mean I am unable to re-mortgage?

yelf

Yes, you will need PHI as opposed to crappy MPPI (and seld employeds cant not get unemployment cover)

Mrs_Bumble

yelf wrote: »

Yes, you will need PHI as opposed to crappy MPPI (and seld employeds cant not get unemployment cover)

Self employed can get unemployment cover but would have to cease trading to claim on it.

If you have one years accounts then it would be difficult to remortgage at that time, you may be offered another deal by your existing lender or you would remain on the SVR or whatever deal the current product reverts to.

What sort of interest rate are you on at the minute, what sort of penalties? Might be worth speaking to an independent broker now and seeing whether it would be worth paying the penalties now and switching your product to give you a bit of stability for the next couple of years until you have a few years accounts and so things would be easier?

apples1

it was not easy with two years good accounts and a 1st class record so i would not bank on being able to shop around for a remortgage after a year. As suggested either move now or be prepared to be sticking with your current lender.

martini75

I have only just taken out the the loan as a first time buyer. My rate is currently 6.2% when the 2 year fixed rate deal ends. Not sure of the penalities i'll have to check. So Mrs Bumble, are you thnking it might be bestter to get a longer term fisxed rate now, so I can then get a couple of years self employed accounts together?

Spangled

FWIW, I got a mortgage with HSBC earlier this year and both my wife and I are self-employed with various income streams (PAYE, self-employed, company dividends, contract work etc). We needed to provide three years of certified accounts OR a letter from our accountant(s) showing declared earnings for the last three years.

We're porting our mortgage deal to a new property this summer and it had to go through the underwriters again (but that's cos it is a new property - if you're staying put then it wouldn't).

I also think what is key is who your current lender is. Do they usually have a range of good-value deals available? Previous lenders I've been with have had limited or poor-value options for remortgaging which is why I've mortgaged away from them. HSBC usually seem to have - IMO - some decent deals on offer so I anticipate sticking with them. That said, I'm on a lifetime BR+0.99% tracker with them and don't intend moving from that deal for a while.

koexelek

Spangled wrote: »

I also think what is key is who your current lender is. Do they usually have a range of good-value deals available? Previous lenders I've been with have had limited or poor-value options for remortgaging which is why I've mortgaged away from them.

Nail on head.

Unless things change drastically, it is unlikely that any new lenders will be interested in a fairly newly self employed person, when it comes to the end of the deal, so staying with current lender looks the best option