Remortgage While Unemployed

Can You Remortgage If You Are Unemployed?

The short answer is that it depends on your circumstances. Most mainstream lenders require proof of regular income to approve a remortgage application, and traditional employment income is the simplest way to demonstrate this. However, being unemployed does not automatically disqualify you from every lender on the market.

There are several scenarios where a remortgage may still be achievable:

• You have other income sources - Rental income, investment returns, pension income or income from a partner on the application can all count towards affordability
• You are about to start a new job - Some lenders will consider applications where you have a signed employment contract with a start date, even if you have not yet begun working
• You are doing a product transfer - Switching to a new deal with your existing lender often involves less stringent affordability checks than a full remortgage with a new lender
• You have significant equity - A low loan-to-value ratio can work in your favour, as the lender has greater security in the property

It is important to be honest about your employment status on any application. Providing false or misleading information to a lender is mortgage fraud and carries serious legal consequences. Always declare your true circumstances and work with a qualified adviser to find legitimate solutions.

If you are currently receiving Jobseeker's Allowance or Universal Credit, these benefits are generally not considered as income for mortgage affordability purposes by most lenders. However, other types of benefits such as disability benefits or child maintenance payments may be accepted by some lenders.

Product Transfers: The Easiest Option When Unemployed

If you are currently unemployed, a product transfer with your existing lender is often the most straightforward route to securing a new mortgage deal. A product transfer means switching from your current rate to a new deal with the same lender, without going through a full remortgage application.

The key advantage of a product transfer is that many lenders carry out fewer affordability checks than they would for a brand new application. Since you are already their customer and they hold a charge on your property, some lenders will allow you to switch products without reassessing your income in detail.

There are some important points to understand about product transfers:

• No additional borrowing - You will typically only be able to switch your existing balance to a new rate, not borrow more
• Limited options - You are restricted to what your current lender offers, which may not be the most competitive rate on the market
• No change in term - Some lenders may not allow you to extend or shorten your mortgage term during a product transfer without an affordability check
• Existing terms apply - Your current mortgage terms and conditions generally remain the same

Even though a product transfer may not get you the absolute best rate available, it can still save you a significant amount compared to reverting to your lender's standard variable rate (SVR). SVRs are typically much higher than fixed or tracker rates, so securing any new deal is usually better than doing nothing.

Contact your existing lender directly or speak to a mortgage adviser to find out what product transfer options are available to you. Many lenders allow you to arrange a product transfer up to three months before your current deal expires.

Alternative Income Sources Lenders May Accept

While you may not have employment income, lenders can consider a range of other income sources when assessing your remortgage application. Having one or more of these can significantly improve your chances of being approved.

Rental income. If you own buy-to-let properties or receive income from lodgers, this can be counted towards your affordability assessment. Different lenders treat rental income differently, with some counting 100% and others using a lower percentage.

Pension income. If you are receiving a private or state pension, this is usually accepted as a stable income source. Lenders view pension income favourably because it is regular and predictable.

Investment income. Dividends from shares, interest from savings or income from other investments can sometimes be included. You will typically need to demonstrate a consistent track record of receiving this income.

Maintenance payments. Court-ordered child maintenance or spousal maintenance may be accepted by some lenders, particularly if it is being paid through the Child Maintenance Service or is documented in a court order.

Partner's income. If you are applying jointly with a partner who is employed, their income can carry the application. Many couples in this situation apply jointly so that the employed partner's income satisfies the lender's affordability requirements.

Severance or redundancy payments. While a lump sum payment is not ongoing income, having substantial savings from a redundancy package can demonstrate your ability to meet mortgage payments in the short to medium term.

A specialist mortgage broker can assess all your income sources and match you with lenders whose criteria align with your situation. Different lenders have very different policies on what income they will accept, so expert guidance can make a real difference.

Steps to Take Before Applying

Preparation is crucial when applying for a remortgage without traditional employment income. Taking the right steps before you apply can improve your chances of success and help you avoid unnecessary credit searches that could damage your score.

Check your credit report. Obtain copies of your credit report from the three main credit reference agencies: Experian, Equifax and TransUnion. Look for any errors and dispute them before applying. Make sure all your financial accounts are up to date and that there are no missed payments showing.

Gather your financial documentation. Even without payslips, you will need to provide evidence of your financial position. This may include bank statements showing savings and regular income, tax returns, benefit letters, pension statements, investment portfolio reports and any other documentation that supports your application.

Calculate your equity position. Knowing your current loan-to-value ratio is essential. If your property has increased in value or you have paid down your mortgage significantly, you may have more equity than you realise. A lower LTV generally opens up better options.

Reduce your outgoings. Lenders look at your committed expenditure when assessing affordability. Paying off credit cards, cancelling unused subscriptions and reducing other debts before applying can improve your debt-to-income ratio.

Consider the timing. If you are actively job hunting and expect to secure employment soon, it may be worth waiting. Having a confirmed job offer with a start date can dramatically improve your options. Some lenders will accept a contract of employment even before your first day.

Speak to a broker first. Before making any formal applications, consult a whole-of-market mortgage broker. They can carry out a soft credit check and assess your situation without leaving a footprint on your credit file. This way, you can understand your options before committing to a full application.

What to Do If You Cannot Remortgage

If remortgaging is not possible in your current circumstances, there are other options worth considering to manage your mortgage costs and protect your home.

Speak to your current lender about forbearance. If you are struggling with payments, your lender has an obligation under FCA rules to treat you fairly and consider options such as a temporary payment holiday, switching to interest-only payments for a period, or extending your mortgage term to reduce monthly payments. Contact them as early as possible rather than waiting until you fall behind.

Contact a free debt advice service. Organisations such as Citizens Advice, StepChange Debt Charity and the National Debtline offer free, confidential advice about managing debt and mortgage difficulties. They can help you understand your rights and negotiate with your lender on your behalf.

Check your eligibility for Support for Mortgage Interest (SMI). If you are receiving certain benefits such as Universal Credit, Income Support or Pension Credit, you may be eligible for help with your mortgage interest payments through the SMI scheme. This is now provided as a loan rather than a grant, but it can provide vital breathing space while you get back on your feet.

Review your mortgage protection insurance. If you took out mortgage payment protection insurance (MPPI) or income protection insurance, check whether your policy covers unemployment. Many policies include a waiting period before claims can be made, so review the terms carefully.

Consider a lodger. If you have a spare room, taking in a lodger can provide additional income. Under the Rent a Room scheme, you can earn up to a certain threshold tax-free each year from letting a furnished room in your home. This income could help cover your mortgage payments and may also count towards a future remortgage application.

Wait and reassess. Sometimes the best course of action is to focus on securing new employment before attempting to remortgage. Once you have a few months of payslips from a new job, your options will improve significantly.

Protecting Your Home During Unemployment

Keeping up with your mortgage payments should be a top priority during unemployment, as your home is at stake. There are practical steps you can take to protect your position and give yourself the best chance of weathering this period.

Prioritise your mortgage payment. Your mortgage should be treated as your most important financial commitment. While it can be tempting to prioritise more aggressive creditors, failing to pay your mortgage puts your home at risk. Other debts, while important, generally carry less severe consequences for missed payments.

Create a stripped-back budget. Go through all your outgoings and eliminate anything non-essential. Cancel subscriptions, reduce energy usage, and look for savings on insurance, broadband and other regular bills. Every pound you save helps maintain your mortgage payments.

Build an emergency fund if possible. If you received a redundancy payment or have savings, set aside enough to cover at least three to six months of mortgage payments and essential bills. This gives you a buffer while you search for new employment.

Keep records of everything. Document all communications with your lender, any agreements reached, and your efforts to find new employment. If your situation worsens and legal proceedings are ever initiated, having a clear record of your proactive approach can work in your favour.

Act early if you are struggling. The worst thing you can do is ignore the problem. Lenders are required by the FCA to work with borrowers who are experiencing financial difficulty. The earlier you make contact, the more options are typically available. Most lenders have dedicated support teams for customers facing hardship.

Understand your rights. Under FCA rules, your lender must treat you fairly if you are in financial difficulty. They cannot repossess your home without following the proper legal process, and courts will want to see that they have explored all reasonable alternatives before granting a possession order. Knowing your rights can help reduce anxiety during a difficult time.