Being Self Employed shouldn't affect you getting a mortgage.

A large myth suggests that because you are self-employed, you will find it harder to get a mortgage. Maybe that was so a few years ago, but not today.

Yes, the financial crash took its toll on the self-employed and quite rightly killed off the ‘self certification’ type deals (no proof of income).  But today lenders are quite happy to lend to those who are self-employed and have a good track record.  The majority of lenders require two years accounts and will tend to average your last two years figures.  However, there are also some lenders who will look to assist you even if you are in your first year.  Some will also consider just last year’s figures, even if you have been self-employed for longer.

Generally, the longer you’ve been self-employed and the more years accounts you have, the larger number of lenders you will have who are willing to assist.

Some lenders do not require to see your full accounts but will require an accountant’s certificate to be completed.  This differs lender to lender. Some will require a full set of accounts and/or an accountant’s certificate!  Some will require this and/or tax year overviews and more.  All can be requested via HMRC.

They may also require to review business bank statements to review day to day cashflows and possible projections for future income, including potential contracts, etc.

This can also change depending on the make up of your self-employment, whether a sole trader, partnership, Ltd company director and so on.

Deposit requirements can range lender to lender, but the bigger deposit you have, the greater the number of deals will be available to you.

Finally, plan ahead.  Six months ahead of your mortgage requirements, make sure you have your house in order.  Check your bank statements are in good order, check you have the right accounts and relevant paperwork from your accountant.  Don’t have too many credit searches in a short amount of time as this could affect your credit score.  Ensure you are on the electoral role and have decent breathing space on card limits and loans.  All of this should put you in a good position before the lender even looks at their ability to lend to you!

Don't panic just yet, but be aware of your mortgage rate and options

In historic columns I have used the word 'panic' to describe the possible rush to secure a good mortgage deal before they vanish when rates rise.  It’s not quite at that stage just yet, but we have seen some rate rises this week from both Santander and TSB.

However, there is another important term I think worthy of mentioning now and this is ‘Payment Shock’. A well worn term during the mid to late 90's and one which I think Mr Jannels 'senior' may have played a part in coining! It describes the potential increase in monthly mortgage payments when an incentive period, for example a fixed rate, comes to an end and the mortgage moves to the lenders standard variable rate. It is worth reflecting that a one per cent uplift on a mortgage of £200,000 may mean a monthly increase of circa £166 and, in many cases the rate may well increase substantially more than this.  Imagine the impact of a two or three per cent rise!  Not unusual if the lenders standard variable rate is in the late four per cent range. We know one that’s over six per cent! 

We try to keep a listening ear open to those in our sector who are considered 'gurus' and their predictions on interest rate rises and when they will happen. In truth, no one can be certain, other than that they will rise, although this has been mentioned for over ten years!  It is important therefore for mortgage borrowers to consider the potential of any rate increase (payment shock) and how it will affect them. A good time perhaps to consider a new fixed rate?

Finally, a commentator once wrote about consumers carefully researching prices for a new dishwasher or fridge and then shouting from the rooftops when they have saved £20 from shopping around. And, why not? Yet the financial press and advisers alike will regularly lament on the fact that borrowers will allow their monthly mortgage payments to continue regardless when they could be saving multiples of £20 every month especially when such a saving could go towards paying for life insurance, that they may not currently have! 

Mortgage borrower demands are shifting!

In recent months there has been some much-needed attention drawn to customers who have experienced some type of adverse credit. Many specialist lenders and building societies are leading the way both in terms of the education process and through some innovative and highly competitive product ranges.

There is no hiding from the fact, or should there be, that borrowing demands are shifting and many high-street lenders are struggling (or unwilling in some cases) to adapt to them. The fact is that growing levels of credit related issues are emerging. In the vast majority of cases these remain minor, but this doesn't stop concerns being raised over credit histories and consumers future ability to secure a mortgage.

Recent research from specialist lender Pepper Money suggested that the majority of people who have experienced credit problems in the last three years are worried about being declined a mortgage. Its survey found that 69% of those who are seeking a mortgage or remortgage in the next 12 months are concerned about having their application declined due to their credit history.

We have spoken to many clients who, due to their credit history, felt that they couldn’t get a mortgage or remortgage from their current lender. On the back of this, we are forming even stronger alliances with a variety of lenders to help get this message across and ensure that our staff have the knowledge and access to the types of deals which can help such borrowers to achieve their homeownership aspirations.  It's these types of fresh approaches which will enable us to assist more people with the appropriate solutions and help clients put their past credit issues behind them.

Whether it’s a CCJ, Default, IVA, payday loan, missed payments, bankruptcy or even a previous property Repossession, lenders are looking to assist clients who have had these issues.  Yes, depending on the level of adverse credit, the rate maybe slightly higher than a standard high street mortgage, but we use specialist lenders as stepping stones on the road to credit repair (obviously, all subject to terms and conditions), with the ultimate target of returning to the high street lender option as quickly as possible. 

Let’s hope that 2020 is the year that this sector of the mortgage market starts to generate headlines for the right reasons.

Happy New Year! Are you financially prepared for the year ahead?

And so another year begins, have you made any resolutions?  If not, make one to review your mortgage!  Now that the election is out of the way and we have a ‘clearer’ route to Brexit, lenders will look at their strategies for the next few years and I’m sure somewhere in those plans will be reviewing their rates and offerings to maximise profitability. 

In the meantime, one lender has already reduced a 5 year fixed rate to under 1.5% with free valuation, free legals on remortgages (£300 cashback for purchases).  There will be other similar deals available, and terms obviously apply, but the fact that these rates are so low so early in the year is impressive!

Technology will play a huge part in the mortgage market over the coming few years.  I’m sure mortgages will be available through a full ‘comparison type’ model shortly.  But it does not necessarily mean it’s the right option for you.  As with some current comparison sites, some of the options provided are those that pay a referral fee to the site and may not be the most suitable for the end user (although they might pay the highest referral fee to the providing site!).

We understand that a straightforward customer who fits the high street with 2.4 children, lived at their current address for ten years, has consistent employment, no debts and wants to remortgage pound for pound, will be an ideal customer for the technology model.  However, not everyone will fit this model and thus the human touch will be required for some years yet.

And of course, this is all relying on you having a decent credit score.  You can’t turn on the TV without seeing an advert for your free credit score!  This is an assessment on all available financial information and calculates a 'score' for the lender.  It also includes a search on your overall credit history covering, in the main, all of your financial transactions over the last few years.

Most lenders credit score applications to try and assess your ability to repay any loans.  Nearly all financial institutions will register a credit search against you.  So, if you have recently updated your car insurance, home insurance, taken out a mobile contract and just got a new credit/debit card, that’s probably four searches in a short amount of time!  So even before starting the full mortgage process, have a chat with a professional adviser and seek their advice what to do and when, to enable the best chance of getting a mortgage first time.