Certificate of Deposit: Mortgage

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2012年8月5日星期日

Contractor Mortgage Options

Freelancers, contractors and consultants often find it tough to secure decent mortgages simply because their style of employment does not meet the criteria deemed necessary by most financial institutions. This is one of those areas that people new to contracting and freelancing are often unaware of - the disadvantages of not having a rigid income stream.

Most banks and building societies unfairly penalize contractors or anyone classed as 'self-employed' because they write them off as a possible repayment risk. This has been a constant source of frustration for the contracting sector particularly when the majority of freelancers earn a far higher salary than their counterparts in fixed or regular employment. And often, even if they do decide to offer the contractor some kind of mortgage, it will be a mortgage based on self-certification. This might seem fair, but such self-certification mortgages are normally only offered with extremely high punitive interest rates or charges.

There are however a new breed of mortgage lenders and brokers now coming to market who cater specifically towards the freelance sector. Such companies look at the positives of the contractor employment status and higher salary and do not try to exploit them. They will offer mortgages that are not tied into the old and expensive celf-certifiable mortgages and will instead use a form of income verification that they have already negotiated with lenders. Such a system allows contractors to borrow based on an annualized multiple of their contract rate, and with a minimum of deposit (although more can be used if the contractor wishes).

Most reputable companies that broker such contractor mortgages will stick to this formula. Look out for annualized contract rates, low deposits, competitiveness with national rates and little, if any, broker fees. Steer clear of self-certification mortgages with punitive charges and high rates and these days you'll find as a freelancer it is possible to find a decent mortgage as a contractor.

The Bedouin Group offers Contractors Umbrella Company alternatives and contractor mortgages so they can increase their take home pay.

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2012年7月6日星期五

The Retracting Self-Certification Mortgage Market

Once upon a time self-employed workers found it nearly impossible to get a mortgage unless they had an enormous deposit and a large income from their business activities that spanned many years. Those times may be about to return as lenders are pulling their self-certification mortgage products from the market as if they are tainted beef.

Many years ago lenders had strict criterion regarding who they would lend money to and the circumstances under which home loans would be approved. Life was simpler then as the great majority of the workforce had steady employment, a salary or wage, and monthly payslips.

However, as time went by the workforce slowly evolved into a mix of employed and self-employed workers, business owners, investors, and freelancers. Although a large portion of the workforce remained employed, a significant portion of those workers began to receive bonuses and commissions instead of a salary. This created uncertainty regarding their monthly incomes. Additionally, many other workers became self-employed and others became proprietors of small businesses which provided their daily bread.

Finding a standard employee with a steady, provable and predictable salary was no longer easy. This meant that traditional mortgage products were no longer applicable to a large portion of the workforce so lenders were forced to invent a new type of home loan to ensure they could keep on lending.

Enter the self-certification mortgage. A product originally designed for self-employed workers who did not receive a pay slip from their boss each month. Instead these workers contracted out their services to business that would pay them by the hour, or they ran their own small businesses and billed their clients when their work was done. Many self-employed individuals who worked in this manner had high levels of income so it seemed ludicrous that they should be excluded from the mortgage market.

Self-certification mortgage products were therefore launched onto the mortgage market with the best intentions - to satisfy the needs of self-employed individuals who lenders believed could service the loans. Unfortunately, due to lax lending rules, self-certs were also approved to people with low incomes who simply lied on their application forms about how much they earned. In addition to this, many lenders reduced their required deposit levels, meaning that people with little or no savings could also apply for a self-certification mortgage.

Because of this, great sums of money were loaned to people who should not have been approved for a mortgage. Mortgage brokers and borrowers alike took advantage of the lethal combination of low deposit requirements and not having to prove earnings to the lenders. Self-certification mortgage products are now being squarely blamed for much of the damage that has occurred via the global credit crunch. As a result lenders have pulled hundred of self-cert products from the market and are refusing to lend to anyone on a first-time-buyer basis.

For existing home owners looking to remortgage, lenders have reverted to the stricter criteria that were attached to self-certification mortgages in the first place. These include low loan-to-value ratios and proof that applicants are truly self-employed. Perhaps the lenders had it right in the beginning.

Get in touch with an independent Mortgage Broker for impartial advice on your next mortgage today at http://www.ukmortgagesource.co.uk through our online form

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2012年6月24日星期日

Young, Self Employed, No Accounts and No Savings - How Did I Get a Mortgage?

I was having considerable problems getting a mortgage to buy my first home about four years ago. If I was to believe everything I had heard, I was the ideal candidate for a mortgage - young, a first-time buyer and with an annual income of about £30k. Easy!

No, not easy, actually. Being young with a leaning towards enjoying myself, I had no savings - nothing to use as a deposit. But what about these 100% mortgages I had been hearing about? Surely I qualified? Oh, there was something else - I was also self employed with no accounts.

Self employed with no accounts and no savings.

Could I get a mortgage? It was virtually impossible. Not a single High Street lender would give me a mortgage. Even my bank who have had my services for ten years turned me down; even though my bank knew exactly how much I earned each year and how much I spent each week; even though my bank knew that making the monthly payments on a repayment mortgage would not be an big problem for me.

Then I heard about Self Certification Mortgages.

What is a Self Certification Mortgage? It's essentially a mortgage whereby you decide whether or not you are capable of making the repayments. And that is when the penny dropped, because you see the entire process of applying for a mortgage is premised upon an institution (such as your bank) deciding whether or not you are able to make the monthly repayments.

And what is the formula for working this out? Well, if you are employed it is your salary - a bank will lend you, say, 3 or 4 times your annual salary. Normally they will ask you for a small deposit, say 5%, to demonstrate that your intentions are serious.

Obviously, if you are self employed, and particularly with no accounts, you often do not have an annual salary and you are unable to demonstrate regular monthly income. Many self employed people - notably me - live hand-to-mouth, regularly waiting for reluctant clients to settle outstanding invoices. So how can your ability to repay a mortgage be judged? I discovered that self certification was the answer - i.e. YOU. You make a judgement as to whether or not you are borrowing too much money and whether or not you will be able to afford the monthly repayments. After all, if you are bright enough to run your own business, manage your own tax affairs, handle purchasing and invoicing, surely you are bright enough to work out whether you can repay your mortgage!

Think about it - conventional, salary-based mortgages are judged on the basis of what a person has earned in the past, but a person could be made unemployed within hours of securing a mortgage. On the other hand, Self Certification puts the onus on you predicting what you will earn in the future. Sure, you could go out of business, but a salaried person could also lose their job.

So I thought, well this is good, but I bet that a Self Certification Mortgage is the stuff of loan sharks, with huge interest rates, crushing monthly repayments and Guantanemo-style penalties.

But there was something else I discovered about mortgages. Although the High Street is swamped by lenders, there are only actually a very small number of 'actual' lenders: the majority are intermediaries acting on their behalf, because the number of mortgage applications is so great that intermediaries are required to perform the process of judging each applicant and assessing risk.

So I discovered that whereas a High Street lender would turn me down, a smaller lender might accept me. But get this: the mortgage that I actually received from the small lender at the end of the day was exactly the same as the mortgage which had been refused me by the High Street lender! Only the forumla for judging my ability to repay the mortgage was different, not the mortgage itself!

So what's the catch with Self Cerftification? There is always a catch in my experience, and in this instance it was a very big catch. Whereas a regular mortgage requires the borrower to contribute a deposit of, say, 5%, my Self Certification Mortgage required a deposit of 15%. Fifteen percent!! Of course I can see why they ask for this, why if you are not being judged using the conventional formula you are expected to show some serious commitment. But I didn't have any savings. I was young and self employed for crying out loud.

So what did I do? Okay, I would not recommend this to everybody, but I was desperate for my own home and I knew that I could afford the repayments. I took out a Personal Loan shortly before my mortgage application and, supplemented with a timely invoice payment, I was able to pay the deposit and afford the key refurbishment costs on the property (roof, re-wiring, plumbing etc).

On the High Street this would be called a Home Improvement Loan and acquired AFTER you have obtained a mortgage and purchased the property. I simply borrowed a little more in the form of a Personal Loan before I had acquired a mortgage. I was fortunate in that I could afford to carry the costs of these repayments for the foreseeable future and I had bought on a rising market - the value of my property was already more than the mortgage and personal loan combined before I had even finished the refurbishment (ie. 4 months after buying the property). I would not recommend this to everyone, and you have to be very, very clear about how much you are borrowing and what the total repayments will be.

However, getting on the property ladder and having my own home was the most important thing to me, and it just goes to show that if you look beyond the High Street you can actually find the same or similar financial products but with less of the hassle. The High Street had always made me feel inadequate, a financial failure.

You might be interested to know that, because I was still looking for the catch in my Self Certification Mortgage, I went to a respected, independent financial advisor recently (on the High Street as it happens) and asked if I should change my mortgage to something better. His advice was that I had got a very good mortgage deal and that I should stick with it for the foreseeable future. So I have.

Richard

Richard Evans became self employed as an ICT Consultant and System Developer in 2001. Becoming bored of building systems for other people, he now assists in the running of a financial introducer [http://www.HallamFinance.com] and the loan and mortgage directory [http://www.LoansUnited.com]. Please give these sites a visit, especially HallamFinance.com if you are actively looking for a Self Cert Mortgage in the UK.

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2012年4月21日星期六

Can Loan Debt Stop You Getting a Mortgage Certificate?

With mortgages often exceeding ￡100,000, lenders have to be sure that recipients are trustworthy and will have the means to repay to money during the agreed period. This means that they will often carry out forensic checks on your current financial status, credit history and your employment security. One thing that can really stand in your way is outstanding loans and other debt.

The reason why existing debt is such an important factor for mortgage companies and lenders in general is pretty straightforward. Effectively each person has a level of borrowing that they can safely manage. The bigger your total debt, the riskier you are perceived. This is due to the simple fact that debts need to be repaid, which takes time and the longer you have a loan, the greater the potential for defaulting.

Banks, building societies and other lenders are fully aware that your financial stability is constantly changing. A drop in earnings or the loss of a job can occur almost without warning. If and when it does, your ability to repay outstanding debts will be significantly impaired. This is why your current risk rating is so important in all lending decisions.

To use a real-life example, let's pretend you borrowed ￡10,000 to pay for wedding expenses and have an existing agreement for a new car for ￡6,000. Once you add in any outstanding credit, including overdrafts, store and credit cards, let's say for the sake of this example you have ￡4,000, this can really mount up. In fact you would have ￡20,000 already outstanding, which would clearly impact the mortgage provider's decision.

Assuming that you have a strong credit rating, are happily employed and receiving a good wage, any outstanding debt shouldn't be a major issue though. Whilst you might not be able to borrow as much as you might have perhaps hoped to achieve, it shouldn't mean that gaining a mortgage certificate is impossible.

The more obvious issue, particularly for first-time buyers with no existing equity, is that you would then have to find enough to cover the deposit. Due to the tighter banking regulations that are now in place, most lenders will require a deposit of between 10 and 25% of the total cost of the property.

Between July and September 2011 the average price of a home in the UK was ￡241,461. As such, if you had to provide a 20% deposit on a property at this price, you'd have to have over ￡48,000 ready to hand over. Perhaps the most obvious solution would be to borrow the money from a bank. However, this would of course undermine the whole point of having a deposit in the first place as you would still effectively have a 100% mortgage - albeit possibly through more than one lender. It is for this reason that if you are seeking a mortgage, the provider will have to consider all arrears; otherwise you could potentially keep borrowing just to build more debt - which would be dangerous and counter-intuitive.

So loan debt will certainly be taken into account whenever you come to apply for a mortgage, or indeed any other form of credit. The more debt that you have, the greater the difficulty you're likely to encounter in attempting to borrow more. It will impact your credit rating and it could even mean that you have to delay any decisions on whether you apply; after all, failed applications can count against you for many months, meaning that any undue haste could lead to a substantial delay in securing a mortgage agreement with your bank.

Vincent Norman is a finance writer who writes for a number of finance businesses. For payday loans, he recommends Paydaypower.co.uk

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2012年3月12日星期一

The Advantages And Drawbacks Of A Self Certification Mortgage

When self certification mortgages were originally introduced into the marketplace, the defining concept was that, unlike traditional mortgages, they would allow self-employed people who were unable to produce proof of income from an employer to get a mortgage. Over time, this has changed to include people who work primarily on commission or for other reasons are unable to produce proof of income. The main drawback is that you will be asked to produce a significantly larger deposit and in some cases you will finish up paying higher interest rates. The trade-off is essentially one of higher levels of flexibility against a higher level of cost to you as the consumer.

When the time has arrived to get a self certification mortgage, like anything that comes from a financial services business, you will probably encounter that some of the language that is in routine use by service providers can often be quite difficult to decipher but it's very crucial that you persevere as it is extremely crucial that you have a reliable basic awareness as inevitably this will endow you with an even playing field when it comes to do business with any single financial service provider.

Once you need to apply for a self certification mortgage, the net and various web sites can be an excellent resource in terms of getting in some background research and this researched information is really going to give you a strong hand wants the time comes to actually do a deal with any of the financial institutions. There is a range reasons why engaging in research is a good idea but the heart of the matter is, when your research is good then you put yourself on solid ground when it comes to a time that you need to make a determination on which provider and deal is good for you.

One vital element that you must try not to lose sight of is that the central tenants of what a good deal is (given market conditions) will not fluctuate too heavily. Bearing this information in mind, you can see why it's important to be quite circumspect when looking at the short-term aspects.

One specific thing that you would do well not to attach too much credence to is the figures in the headlines in financial services advertising as those figures are not going to show you a rounded picture. I'm fairly positive that you can't have avoided those ads with the headline so much bigger than any of the other details in the advert. There is one fundamental point here that you must take in. The service provider is absolutely not going to be just giving away their profits for no good reason and one detail you can always be certain of is that if you look closely you will be able to figure out where they will get back that supposed free lunch and you can be sure you will be where that money is coming from!

In recent times, several new transformations have affected things in the financial services industry and possibly the most radical of the changes is the wide adoption of the Internet based application as this has pushed this area of the industry to be far more competitive and on the back of this it has become possible for service users to save a lot of money in relation to what was achievable only a few years ago.

Ultimately, whether you decide to go with an online application or you prefer to deal with a broker or agent for a company directly, doing proper research and understanding all of the potential advantages and drawbacks of this type of mortgage product is absolutely key to making the best decision in the long run.

For useful information about mortgages without the sales pitch please check out the Self Certification Mortgage site.

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2012年1月14日星期六

Self-Certification Mortgage Explained

A Self-certification mortgage is where no proof of income is asked for by the mortgage lender. Self certification mortgages require the borrower to prove that they have the funds in their bank account to pay the monthly mortgage repayments.

When applying for a mortgage, there may not be any way to provide full and verifiable proof of how the deposit and repayments will be made.

In most cases the actual income of the applicant may have been scaled down for taxation purposes. Self-employed workers, for example, probably exploit various tax minimisation methods in order to save on company tax and income tax. When it comes time to complete a mortgage deal their genuine earnings may be understated, causing a state in which they are able to borrow a less significant amount than what they can in reality afford.

It has been stated that many self-employed workers do not keep accurate or exact records of their income and as a result may not be able to provide past years of trading accounts to lenders when completing an application for a mortgage deal. It makes life difficult to secure a full-status mortgage when applying through either Internet or when meeting a high-street lender.

A self-certification mortgage is created to help people in situations such as these. The mortgage depends on how much an applicant can afford and the ability of the applicant to keep up with repayments, it however does not require proof of income.

There are many self-certification mortgages available on the market. Terms and conditions differ between products and they can change factors at any time, in due cause to this, it's always safer to speak to a mortgage broker so that you can get a good insight on which mortgage to go for.

Please visit Mortgages UK for general mortgage related information...

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2012年1月12日星期四

Self-Certification Mortgage Applications Rise

The attractiveness of self-certification mortgage products is boosting the overall number of mortgage applications in the UK.

For true self-certification mortgage products, the applicant does not need to fully prove their income. Rather, they make a declaration of income to the lender based on their past earnings and expected future earnings.

Self-certification mortgage products are growing in popularity as more people receive income in variable patterns and through non-standard forms such as bonuses and commissions.

Originally self-certification mortgage products were designed for the self-employed. The changing composition of the workforces has, however, meant that many employees cannot fully prove their employment income as well.

Not having to fully prove income is believed by some analysts to increase the risk of over borrowing and therefore repossession.

However, provided the applicant does not exaggerate their income on their self-certification mortgage application, they should only be approved to borrow the maximum amount they can afford to repay in accordance with the lenders' criteria.

Additionally, lying about income on a self-certification mortgage application is a criminal offense, and more lenders are challenging applicants' income declarations, reducing the likelihood of borrowing putting themselves at financial risk.

Interest rates are usually higher on self-certification mortgage products than for standard mortgage products and loan-to-values can also be lower. This means the borrower will have to fund a larger deposit thereby increasing their initial investment in their own home.

This can act as an extra incentive for applicants to not lie about their income and over borrow on their self-certification mortgage. If the borrower has their own money at risk, instead of borrowing 100% of the property's value, they are more likely to not over borrow and increase the risk of repossession.

As the composition of the workforce shifts from more people becoming self-employed, self-certification mortgage products should continue to rise in popularity. It is estimated that a quarter of the UK's population are already self-employed and therefore have trouble proving their income, and this figure is growing.

Mortgage lenders have recognised this which is why self-certification mortgage products are so widely available on today's mortgage market. Demand for self-certs should continue into the future and as a result the products should become more competitive.

If you require a self-certification mortgage you should contact an independent mortgage adviser for expert, impartial advice.

UKMortgageSource provides up-to-date Self-Certification Mortgage information

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2012年1月4日星期三

What is a Self-Certification Mortgage?

A self-certification mortgage is a mortgage designed for people who are unable to provide proof of income. This type of mortgage was originally designed for the self employed who historically experienced difficulty obtaining a loan with 'high street' lenders due to not having audited accounts available.

If you are unable to show your earnings due to being self-employed, a seasonal wage earner, or anyone with irregular earnings such as a contract worker or commission-based employee, or in salaried employment with a supplementary source of income, an unsalaried company director, or varying other reasons - a self-certification mortgage could be the best option for you.

Certify Earnings

It allows borrowers to certify their own earnings without having to supply documentation, such as payslips. You declare what your income is but generally you do not need to provide any proof. You can apply if you are employed or self employed. It can also be suitable for professionals who often start on a low salary, but whose incomes can rise rapidly. It has also found favour with salespeople and other workers who receive a high proportion of their income as commission or bonus. Even though you may have achieved high earnings this way for years, commission or bonus may still not be considered in calculations by high street lenders.

A self-certification mortgage is suitable for applicants whose income is not easily verifiable, like the self-employed or those that receive commissions. If you're self-employed, a contractor, have irregular income or multiple jobs, you are probably one of many who know you can afford a mortgage but have difficulty proving your income. They are also quite good for people just starting out in a new career with good steady income and a fair amount of deposit behind them.

It is ideal for self employed people who perhaps have not been in business for the required three years or cannot produce accounts for a three year period but can demonstrate usually through an accountant's reference that they can meet the mortgage payments.

When applying for this type of mortgage you will be required to state your expected annual earnings. The mortgage will be offered on the basis of your likely income rather than you having to provide any documentary evidence.

Deposit

A self-certification mortgage used to require a higher deposit of up to 25%, but now some lenders can offer up to 90% loan to value. Lenders will usually lend up to three and a half times declared income or two and three quarter times joint income. However, with a deposit of 25% or more a self-certification mortgage can usually offer up to five times your declared earnings.

It caries a higher rate than standard mortgages because statistics show most businesses fail within the first two years of trading. So if you were to be left with heavy debt there is a possibility you could lose your home. However, some mortgages are better than others, and, if cash flow is a problem, it's worth checking out those that offer payment holidays and the facility to pay more when you can.

Fortunately there are a number of competitive self-certification mortgage products available, depending on your circumstances and individual requirements. They are now supported by an ever increasing number of mortgage lenders, including mainstream as well as specialist lenders. Interest rates charged are now far more attractive.

It has become increasingly popular in recent years. However, you should always remember that you will be asked your income on the application. Just because you are in a self certification situation, you should only put down your actual income. To do anything else would not only be fraud, but could also mean that you are unable to afford your mortgage repayments, especially if mortgage rates rise in the future.

Bill Stone writes for Direct Online Loans who help homeowners find the best available loans via the www.directonlineloans.co.uk website.

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