Can You Remortgage If Your Income Has Recently Decreased?

A reduction in income can happen for many reasons — job changes, reduced hours, a new role, temporary leave or a downturn in self-employed earnings. If your remortgage is due, it’s natural to wonder whether lenders will still consider your application. The good news is that it is often possible to remortgage after an income decrease, but lender affordability assessments become more detailed.

This guide explains how lenders assess a remortgage if your income has recently decreased, what evidence they require and the options available if affordability becomes tighter. This article provides general information only and does not offer regulated mortgage advice.

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Do Lenders Allow Remortgaging After an Income Drop?

Yes — but the application must pass the lender’s affordability checks using your current income level.

Lenders will not consider:

• Your previous higher earnings, or
• Assumed future salary increases

Instead, they base the assessment solely on what is verified today.

Depending on the size of the decrease, you may still qualify for a remortgage, but product choice may be different.

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Why Lenders Focus Heavily on Affordability

Affordability tests help lenders understand whether:

• Monthly repayments remain manageable
• Your income is sustainable
• You have enough surplus after essential spending
• Your financial behaviour supports long-term borrowing

A drop in income affects these calculations, so lenders look carefully at supporting documents.

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Reasons Income May Have Decreased — and How Lenders View Them

Lenders don’t judge the personal circumstances; they simply assess how stable and sustainable the new income is.

1. Job change or new role

Usually fine if the new contract is permanent and income is stable.

2. Reduced hours

Lenders use the new contracted hours for affordability.

3. Maternity, paternity or adoption leave

Some lenders use return-to-work income if confirmed by employer documentation.

4. Variable income reduced (bonus, commission, overtime)

Lenders may average variable income over 3–12 months.

5. Self-employed income drop

Lenders use the most recent year or a multi-year average depending on policy.

6. Temporary illness or career break

Affordability may be affected unless there is clear evidence of return to work.

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How Lenders Assess Remortgage Applications After an Income Drop

1. Current Income Verification

Lenders require:

• Latest payslips
• Employment contract
• Bank statements showing salary
• P60 (sometimes)

Self-employed applicants must provide:

• SA302s or tax calculations
• Full accounts
• Evidence of trading continuity

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2. New Affordability Calculations

Your borrowing capacity is recalculated using:

• New base income
• Updated monthly outgoings
• Any reduced or missing variable income
• Loan-to-income caps
• Stress-testing at higher interest rates

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3. Review of Spending and Bank Conduct

Bank statements help lenders evaluate:

• Whether spending patterns have adjusted to the new income
• Whether unarranged overdrafts occur
• Whether bills remain paid on time
• Whether BNPL or short-term borrowing has increased

Strong conduct can support a lower income.

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4. Stability of the New Income

Lenders assess whether the new income level:

• Is permanent
• Is likely to continue
• Matches the contract
• Is evidenced consistently on statements

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5. Loan-to-Value (LTV) and Equity Position

Even with reduced income, strong equity can improve options.
Borrowers with lower LTVs (under 60–75%) often have more flexibility.

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What Happens If You No Longer Meet Affordability?

If your income is now too low to pass affordability tests for external lenders, you still have options:

1. Product Transfer With Your Existing Lender

Most lenders:

• Do not require a new full affordability check for a product transfer
• Do not require a valuation
• Allow you to switch to a new fixed or tracker rate easily

This is often the simplest solution after an income decrease.

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2. Reduce the Loan Amount

If possible, overpayments or savings can reduce the size of the mortgage and improve affordability.

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3. Extend the Mortgage Term

Some lenders allow term extensions to lower monthly payments (terms vary).

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4. Consider Specialist Lenders

If the income change is recent or complex, specialist lenders may have more flexible criteria.

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5. Reapply Once Income Is Stable

If income is expected to rise again (e.g., after probation, returning from leave), some borrowers wait until the increase is formally confirmed.

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Common Scenarios and How Lenders Respond

Scenario 1: You changed jobs with a permanent contract but lower pay

Often acceptable, but borrowing capacity may reduce.

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Scenario 2: You lost bonus or overtime income

Lenders may remove variable income from affordability unless it continues regularly.

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Scenario 3: Self-employed income has declined year-on-year

Many lenders will use the latest year only, which may reduce borrowing options but not prevent approval.

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Scenario 4: Your income has decreased temporarily (e.g., maternity leave)

Some lenders accept employer confirmation of return-to-work salary.

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Scenario 5: Big income drop combined with high outgoings

More challenging; bank conduct becomes crucial.

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How to Strengthen Your Application After an Income Decrease

(General Information Only)

Many borrowers take the following steps:

1. Improve bank statement conduct

Aim for 3–6 months of:

• No unarranged overdraft use
• Consistent bill payments
• Controlled spending

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2. Reduce credit commitments

Lower monthly outgoings help strengthen affordability.

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3. Keep credit utilisation low

Underwriters look favourably on responsible credit use.

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4. Avoid new borrowing

New credit can dilute affordability and increase risk.

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5. Prepare documentation early

Contracts, payslips and bank statements should be ready before applying.

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6. Consider timing carefully

Some applicants wait until:

• Probation ends
• Income stabilises
• Bonus or overtime patterns return

These are general considerations only.

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When a Specialist Lender May Be Suitable

You may need a specialist lender if:

• The income drop is very recent
• You rely heavily on variable or irregular income
• Your bank statements show temporary instability
• You have additional credit issues
• Your income structure changed (e.g., PAYE to contractor, self-employed dip)

Specialist underwriting can take a more holistic view of your financial situation.

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Summary

A remortgage if your income has recently decreased is usually possible, but lenders will reassess affordability based on your current earnings. Key factors include:

• Stability of your new income
• Updated affordability calculations
• Bank statement conduct
• Loan-to-value ratio
• Whether a product transfer is available

Even if external lender options narrow, most borrowers can still move onto a new deal with their current lender.

This article provides general information only. For personalised support, regulated mortgage advice is required.