Remortgaging When Unemployed or With Lower Income

Remortgaging can be a useful way to access the equity in your home or reduce monthly repayments by getting a better deal on interest rates, but it can be a little more complex if you’re on a lower income or unemployed.

In this article, we’ll identify the potential barriers and explore solutions that make remortgaging on a low income much more achievable.

We’ll also show you how a specialist broker can smooth the process and increase your chances of success.

Can you remortgage on a lower income?

Yes, it’s possible. Even if your income is lower now than when you first bought your house, there are still plenty of options for remortgaging.

As with any remortgage, you’ll need to meet the lender’s eligibility requirements, but a drop in income won’t necessarily make it impossible.

How different workers might be affected

A lower income might not simply mean that you’ve switched to a lower-paid job; it could mean a completely different way of working.

A couple of the most common scenarios are:

• Newly self-employed: If you’ve recently started your own business and are establishing regular work and clients, it can be harder to prove your income. While many lenders want to see three years of accounts, some are happy with just two years, or even less if you have a strong track record within your industry and otherwise good credit scores.
• Zero-hours contracts: Don’t assume that a zero-hours contract means your remortgage is a lost cause. Although many lenders will see you as a riskier applicant, many appreciate the nuances of this type of work arrangement and are prepared to look on a case-by-case basis. It will boost your application if you show at least 12 months’ experience/payslips within a zero-hours contract and a corresponding P60.

Can you remortgage if you’re unemployed?

It’s unlikely that you will meet a lender’s eligibility requirements if you’re not working at all, but there may still be ways to show that you have income coming in, even if it’s not earned.

This could be in the form of things like benefits, investments or rental income. You also have the option to use a guarantor if your income isn’t high enough.

How a broker can help

Remortgaging on a lower income can be complex, so it’s definitely in your best interests to get some expert advice.

Here are two key areas where a broker with experience helping people in such circumstances can help:

Help you prove your income

One of the most frustrating aspects of remortgaging on a lower income is proving to potential lenders exactly what your income is or is likely to be in the near future. A broker can help you find all the right documentation, whether you’re employed, on a zero-hours contract or self-employed.

Requirements can vary from lender to lender, so having an expert on hand who can help you with accounts, SA302 tax returns, payslips, and P60s can be a huge relief.

Identify the right lenders

The advisors we work with have extensive experience with lenders willing to lend to people on lower incomes and often have existing contacts that they can go to directly.

They can eliminate those hours of your time visiting lenders on the high street or searching online and guide you straight to the right lenders for your circumstances.

Our free broker matching service can connect you with an expert who specialises in finding remortgage deals for people on low incomes.

If you make an enquiry, we can arrange for a specialist in this area to contact you directly.

Minimum income requirements

Many lenders don’t have fixed minimum income requirements, as it’s more a question of overall affordability.

Most lenders will be more concerned about the level of your income relative to the loan size you’re looking for, so minimum income levels can often feel arbitrary.

That said, some lenders set limits, commonly around £20,000 a year, but lower in some instances. A specialist broker can steer you towards lenders who are prepared to look at applications on a case-by-case basis.

Can benefits count towards income?

If you’re struggling to meet the minimum income requirements to remortgage, there are lenders who are happy to count some benefits within their income calculations.

If you’re in receipt of any of the following, they could help you to secure the finance you need:

• Attendance Allowance
• Bereavement Support Payment (BSP)
• Carer’s Allowance
• Child Benefit
• Child Tax Credit
• Employment and Support Allowance (ESA)
• Industrial Injuries Disablement Benefit (IIDB)
• Maternity Allowance
• Personal Independence Payment (PIP)
• Pension Credit
• Universal Credit
• Working Tax Credit

Another way to supplement your income for remortgaging is to ask your lender to consider any eligible assets you may have as extra security. These could include stocks, shares, pension funds, investment properties, and even cash.

A mortgage advisor can make sure you’re exploiting all potential sources of supplementary income to get the best deal possible.

Using a guarantor to remortgage on a lower income

If your income really is too low, even with benefits, to allow you to remortgage, then switching to a guarantor mortgage could be an option.

With a guarantor mortgage, you’re asking a friend or family member to guarantee your repayments by signing a legally binding agreement to say they will be responsible for your debt should you default. Sometimes lenders ask guarantors to hold a large amount of untouchable savings with them as a form of deposit until an agreed amount of the loan has been paid off.

Using a guarantor is only really advisable when you feel confident you will be able to make your mortgage repayments yourself, but just can’t meet the lender’s minimum income requirements – you don’t want to actually saddle your loved ones with your debts. It’s a big ask, so get some expert advice from a broker before you commit.

Can you remortgage during redundancy?

If potential redundancy is on the horizon, it’s best to discuss this with your lender.

Remortgaging could be a sensible move. When it’s done right, it can reduce your monthly payments and thus help you economise while you’re living off your redundancy pay.

If you know for sure that you’re going to be made redundant, the situation is slightly different. You then have a duty to inform potential lenders, and they may be less keen to lend, especially if you don’t have any other assets or income.

Suppose you’re finding it hard to remortgage during a redundancy and are worried about making your repayments every month. In that case, other options might be temporarily switching to an interest-only mortgage or even government help via the Support for Mortgage Interest scheme (SMI).

Get matched with a broker specialising in remortgaging with a lower income

You can give yourself the best possible chance of success by getting advice from a broker who specialises in finding lenders for people who are unemployed or on lower incomes.

They will know exactly which lenders are likely to be most sympathetic to your circumstances. By finding you the best deal for your situation, they can save you a lot of time, worry, and potentially expense.

Our free broker-matching service works on a case-by-case basis. We assess your unique circumstances to match you with a mortgage advisor who has specific experience in helping secure remortgages for people on lower incomes.

Call 0330 822 0505 or make an enquiry, and we’ll set up a free, no-obligation chat between you and a specialist low-income mortgage broker today.