Self-employed guide
Refinancing when you're self-employed
Refinancing follows the same basic underwriting rules as a purchase mortgage — lenders still want two years of documented self-employment income — but the timing and goals are different. Here's what to expect if you're self-employed and considering a refinance.
Your documentation requirements don't get easier
A common assumption is that refinancing an existing mortgage is simpler than qualifying for a new one, since you already have a track record with a home. For self-employed borrowers, this usually isn't true — you'll still need to provide two years of tax returns, a year-to-date profit and loss statement, and business documentation, the same as a purchase. Owning the home already doesn't reduce the income documentation lenders require.
Timing around your tax return matters
If your most recent tax year showed lower income than the year before, refinancing right after filing that return can actually work against you, since it becomes part of your two-year average. Some self-employed homeowners choose to wait until a stronger year is filed before refinancing, if the timing is flexible and rates allow it.
Common reasons self-employed borrowers refinance
Lowering a rate when market rates drop, removing PMI once enough equity has built up, switching from an adjustable-rate to a fixed-rate loan, or a cash-out refinance to fund business investment or other needs. Each of these still requires the standard self-employment income documentation, regardless of the reason for refinancing.
Cash-out refinances get extra scrutiny
If you're pulling equity out of your home, lenders tend to apply somewhat stricter income verification than a standard rate-and-term refinance, since the loan amount and risk profile are both increasing. Have your documentation especially well organized if this is your goal.
Should your income has changed significantly since you bought
If your business income has grown substantially since your original purchase, a refinance can sometimes qualify you for better terms than you had originally, since your income-to-loan ratio has improved. Conversely, if income has dropped, it's worth running updated numbers through the calculator before applying, to see how a lower qualifying income affects what you can refinance into.
Frequently asked questions
Can I refinance with only one year of updated self-employment income?
Lenders still typically average two years, so one strong recent year alone usually won't override an unfavorable two-year average, though it may still be considered supporting context.
Does refinancing reset my PMI?
It can. A new loan is underwritten independently, so if your new loan-to-value ratio is above 80%, PMI may apply again even if you'd previously cancelled it on your original loan.
Is a bank statement refinance an option?
Yes, non-QM lenders that offer bank statement loans for purchases generally offer them for refinances too, under similar terms and typically higher rates than conventional refinancing.