Contractor's Tools
IR35 News
Recruiter FAQs

Are you switching from Limited Company to Umbrella Employment? Click here to calculate your take home pay >>

We have created an information hub to support our Orange Genie Accountancy clients, our Umbrella Employees and agencies where the Covid-19 rules and legislation are explained for recruiters, contractors and the self-employed. Click here to find out more>>

Remortgage for Contractors

Remortgage

Here is everything you should know if you are keen to find out if contractors can get a remortgage.

As a home owner the chances are if you have a fixed rate mortgage it will eventually expire. 

There are a few things you should know before approaching a remortgage however, like evidencing your income and the hurdles you might face through the process as a contractor. Our partner CMME discusses what you need to consider when your current mortgage rate is coming to an end. 

Click here to use CMME Remortgage Calculator>> 

What is a Remortgage?

First of all the basics, what actually is a remortgage?

A remortgage is the process of moving your current mortgage to a new provider, generally undertaken when your current fixed rate is coming to an end. 

  • Take advantage of low interest rates
  • Your current fixed deal is up for renewal
  • You want to move from interest-only to repayment
  • You want to be on a better rate than you're currently on
  • You want to be able to make overpayments
  • You want to borrow more money

What that means for your rate (Provided for illustrative purposes only)  
Say the offer you’re on begins with an Initial Rate fixed for the first 2 years: 0.87%  
After these two years, you will automatically move onto the Lender’s Standard Variable Rate: 3.59%  
You don’t have to be a math’s prodigy to estimate, based on those two rates alone, that your monthly payments will be significantly higher on the second rate  

The mortgage amount: £350,000  
The loan length: 25 years in total  
On your initial rate, your monthly repayments are: £1,298.56 
On your lender’s standard variable rate your monthly repayments go up to £1,769.12 
That’s an extra = £470.56 a month or £5,646.72 a year – needlessly, because you could potentially remortgage to a better rate

You can also use the CMME Remortgage calculator to show your savings as a comparison HERE>>

Can I get a Remortgage While Contracting? 

Whether you’re new to the world of contracting work or you’ve been contracting for a long time, remortgage might still be foreign territory for you, and it can be a concern since contractors often experience bias in the mortgage market.  

Despite that you should be able to access the most competitive rates for your needs when it comes to your remortgage.

There are a number of ways you, as a contractor, may want to calculate your income to work out your overall borrowing potential:  

  • Hourly Rate  
  • Daily Rate  
  •  Annualised Salary  

To calculate any of the above simply follow the formula below:  

Hourly Rate x Working hours, per day = Daily Rate  

Daily Rate x 260 days (working days) = Annualised Salary (Before tax)  

Remortgage

Loan-to-Value & Why it Matters   

With house prices rising at the fastest rate since 2004, your house might be worth a lot more than it was when you set your current mortgage deal. If that’s the case you may find you’re now in a lower Loan to Value (LTV) band, this means you could be eligible for much lower rates.  

Let’s consider that in a bit more depth; the Loan to Value ratio is a hugely important figure for homeowners to be aware of, put simply it’s the to do with the size of the loan relative to your property’s value. This means that if your house is worth more now than it was when you first purchased your home you might be eligible to lower your repayments straight out of the gate. 

Naturally this is a double-edged sword, if property prices fall there is a risk that the sale of the property won’t cover your outstanding mortgage balance but certainly market trends suggest that house prices will remain high for some time.  

When is it Best to Consider Remortgage While Contracting? 

There are some key times you might want to reconsider reviewing your mortgage rate:    

It’s due for renewal & you’re about to move on to a Standard Variable Rate    

When you can see the end of your current deal on the horizon, that’s the prime time to think about remortgage.   

When your current rate comes to an end your lender will automatically swap you over to their Standard Variable Rate (SVR) which is more than likely going to be higher than the deal you were on previously.  

It’s worth looking at the market because there may well be a better rate out there for you.   

There’s Technically no ‘bad’ Time to Review Your Mortgage Deal 

Many people let early exit fees stop them from getting the best deal available – whilst exit fees are something you should consider before changing deals, it is frequently the case that the associated savings with your new mortgage rate could be worth accounting for the early exit fees.   

As it is likely to be one of your most significant outgoings it makes sense to check you’re not needlessly spending money on your current rate if you could potentially be on a better one.  

Ready to discuss your remortgage deal? 
Speak to our partner CMME who are experts in working with independent professionals like you.

Email: Enquiries@cmme.co.uk or Request Call Back

 

 

Request a Call Back

 

edge promo