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Can You Remortgage When Unemployed?

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It can be difficult to remortgage when unemployed as you’ll be unlikely to meet the lender’s lending criteria. But in some cases, it may be possible to remortgage to a new mortgage deal if you’re not working, but you’ll have fewer lenders and mortgage products to choose from. Let’s take a closer look.

What is a remortgage?

A remortgage is when you take out a new mortgage to pay off your current mortgage.

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You might remortgage to get a better interest rate and lower your mortgage payments. Most people remortgage at the end of a fixed rate for this reason.

Some people remortgage for a higher amount than they owe on their mortgage and use the excess cash to pay off debts or fund home improvements.

To get the best idea of your mortgage options and what mortgage is right for you it’s always worth speaking to a mortgage adviser. Our preferred mortgage advisers offer fee-free advice for most customers.

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Always remember that your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.

Do you need a job to remortgage?

You’ll find it difficult to change mortgage lenders if you want to remortgage when unemployed as you won’t be able to meet the new lender’s income multiple requirements or pass the affordability assessment.

However, you may be able to switch to a new mortgage with your current mortgage lender. This is called a ‘product transfer’ and is a simpler process than a remortgage with fewer checks carried out.

If you have a joint mortgage with your partner and they have a job, you may still be able to remortgage if your partner’s income is sufficient to pay the mortgage.

Some unemployed people may have income from elsewhere such as from benefits, investments or rental income from another property. In some cases, this money might be sufficient to be approved for a remortgage. You might also be able to use a guarantor if your income isn’t high enough.

Do I need proof of income for a remortgage?

You normally need to prove your income when you remortgage.

All mortgage lenders have rules about how much they will lend, based on the applicant’s income. For example, most will lend up to four or five times your annual income. So, if you don’t have an income, you will struggle to get a mortgage or remortgage.

What happens to my mortgage if I lose my job?

Most people rely on their income from their job to pay their mortgage. So, if you lose your job, you may find you can’t afford your mortgage payments.

In this situation, you could use any savings you have to pay your mortgage. You should also try to reduce your outgoings elsewhere.

If you’re struggling to pay your mortgage, contact your lender. It will work with you to find a solution. For example, it might offer a payment holiday, a period of reduced payments, moving to an interest-only mortgage, or lengthening your mortgage term to make your payments cheaper.

Our mortgage partner, also recommends speaking with your mortgage broker about Mortgage Protection Insurance. A mortgage protection policy is designed to help you with mortgage repayments if you end up in circumstances that make it difficult or impossible to keep up-to-date with your repayments.

If you are unsure whether your unique circumstances warrant mortgage payment protection insurance then speak to a professional mortgage advisor. Not only can they talk you through the protection process, but they can also advise on other insurance policies that you might want to consider when buying or selling a home.

Our recommended mortgage adviser can help you find the right mortgage and discuss your cover.

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What happens if I don’t earn enough to remortgage?

You might find it difficult to remortgage if you lose your job and get a new job paying less money.

If you have savings, you could use this money to pay off some of your mortgage and then remortgage for a lower amount.

If you can’t remortgage when unemployed at the end of a fixed rate, you’ll usually be moved to your lender’s standard variable rate (SVR). This is likely to be a higher interest rate than you were paying on your fixed rate.

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Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.

Can I get help from the government to pay my mortgage?

You may be able to get help to pay your mortgage if you are claiming certain benefits. This help is called Support for Mortgage Interest (SMI).

To be eligible for SMI, you usually need to be getting one of the following benefits:

  • Income Support
  • Income-based Jobseeker’s Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA)
  • Universal Credit
  • Pension Credit

SMI offers help with paying the interest on up to £200,000 of your mortgage. You can’t get SMI to repay the capital on your mortgage.

SMI is a loan which you’ll need to repay (with interest) when you sell your home.

What can I do if I can’t afford my home anymore?

If you can’t afford your mortgage anymore or when you find it difficult to remortgage when unemployed, the first thing you should do is speak to your mortgage lender. Banks only repossess homes as a last resort and your lender is obliged to try and help you stay in your home.

If you have a spare room, you could earn some extra money by taking in a lodger. You can earn up to £7,500 a year tax-free by letting a furnished room in your home.

If you have a lot of equity in your home, you could sell your home and use the proceeds to pay off your mortgage and also buy a cheaper property.

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Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.

Last Updated: January 9th, 2023

Phil Spencer

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