Mortgages for Special Circumstances

Self Employed

In many ways self employment has specific advantages : There is no threat of redundancy and your earning potential is enhanced as all profits made are for yourself. It is, however, still sometimes the case that mortgage lenders consider self employed applicants as a higher overall risk than applicants from an employed (PAYE) background.

There is some historical evidence to support this view. In the property boom of the late 1980s many people decided to take advantage of the opportunities offered by self employment and started their own businesses. With high initial borrowing requirements, many people borrowed against the now enhanced values of their homes to finance their business ambitions. The recession that followed in the early 90s hit everyone but, with high mortgage rates increasing the impact on homeowners, banks and building societies saw a higher than average default rate amongst self employed clients who had used the equity in their homes to finance business ventures.

In an attempt to stop the situation from reoccurring lenders introduced more stringent checks for all applicants but were especially cautious in respect of the self employed, in some cases only wishing to entertain applications from long established traders with substantive previous borrowing history.

We now face a much more uncertain future with UK lenders taking a more prudent outlook before they agree to lending. In many cases a self employed applicant can expect to receive the same treatment as an employed applicant but a few exceptions still remain. It may be that you have recently started trading for yourself or that you have no accounts to confirm your historic income levels. In these cases there are now some special schemes that can be applied to assist the self employed.

There is however a common misconception amongst the self employed, and even in some cases mortgage brokers, that simply not qualifying within every aspect of a lenders standard self employed criteria will automatically mean paying a higher than normal rate, this is simply not true.

The typical criteria of a mortgage lender for self employed applicants will be a full three years audited accounts from a Chartered Accountant. Although this is the stated policy of the lender local discretion may mean that applicants with only two or even one years figures may be approved for the same product. Every case is different but if you have less than three years accounts there are many lenders who will consider your application for their best mortgage offers.

Bond Financial Limited understand the way in which lenders view mortgage applications and appreciate the uncertainty that can sometime effect the self employed. We attempt to determine as fully as possible, during the negotiation of a mortgage offer, the way in which individual applications will be viewed by the lender. To assist you in deciding whether a mortgage offer is right for you, on each product profile, we insert a section called “special situations” which gives a brief overview of the parameters a mortgage lender will consider. Although only a guide these notes should help you in deciding if your circumstances are suitable for the individual product.

Retired

Being retired and without a paid employment was until recently seen as a significant problem to those people still having borrowing requirements. Two factors have now transformed the way in which lenders look at the retired.

Many retired people face the dilemma of having a significant proportion of their assets tied up in their property and only having a low disposable income.

On the other hand, with people making better provision for retirement and living longer the demand for borrowing facilities to be available later in life has significantly increased.

Lenders now view retired customers as mature and responsible customers offering generally lower risk than many other consumers. The ability of retired people to raise mortgage funds is therefore significantly enhanced but once again every circumstance is different and different lenders take different views towards these situations.

While in most cases a pension income (from a company or private scheme) will be treated as normal income by lenders there may be circumstances where a special scheme (such as equity release to provide ongoing income in later life) is required.

Bond Financial Limited are aware that these problems sometimes exist in the mortgage market and, in their negotiations with lenders look to try and accommodate as many of these situations within standard mortgage products. When it is not possible to do this Bond Financial Limited may negotiate an individual mortgage rate that specifically caters for retired members needing special assistance. To assist you in deciding whether a mortgage offer is right for you, on each product profile we insert a “special situations” section which gives a brief overview of the parameters a mortgage lender will consider. This section will also note if the product itself is designed to cater for specific problems and attempts to quantify the scope that the product will cater for. Although only a guide these notes should help you in deciding if your own credit history circumstances are suitable for the individual product.

Already Funding Mortgage

With the incidence of divorce and the break up of relationships on the increase many people find themselves shut out from the mortgage market because they are already party to another mortgage on a property where they no longer live. This may adversely effect a persons borrowing capability whether they are the person making the payments to the loan of not.

When a mortgage lender makes an advance to joint parties each individual party is responsible for the repayment of the loan and a lender may approach one of the parties for full repayment of the debt, even if the other party is no longer able to be contacted. This principal is called “joint and several liability” and is standard within most mortgage contracts in the UK today. Until the property is sold, or a party is allowed to be released from a mortgage, by a transfer of equity, agreed by the lender, this situation will remain valid.

When a mortgage application is completed a new lender will always ask if the potential applicant is already party to a mortgage or secured loan that is not going to be repaid before a new loan is taken up. It is a legal responsibility of the applicant to disclose all loans of this type to any new lender.

A lender may take the view that, unless an applicants own individual income can cover both the remaining loan and the new advance, within reasonable income multiples, that a new advance will not be granted.

Mortgage Arrears

This is a difficult area where it is not possible to make a blanket statement regarding the acceptability of another mortgage. The persons individual circumstances will be key to the decision of any new lender.

Bond Financial Limited recognise that this is a problem which is present in the current mortgage market, and one that is set to grow in the future. In our negotiations with lenders we arrange for high levels of discretion to be available, in order to be able to give these circumstances individual consideration based on their merits.

Should this situation be relevant to you then we would ask that you make this clear in the comments section at the end of the application form. This will enable a lender to make a balanced overall assessment of your individual situation. Any supporting details should also be noted here. The general rule is that the more supporting information that is provided, the better the chances of receiving a positive result.
This is probably the most sensitive area for any lender to deal with. The granting of a mortgage advance by a lender does involve a degree of trust. This trust is usually justified by reference to employers (to confirm income levels stated) and previous lenders (to confirm payment history on a current advance).

Mortgage arrears on a current or former mortgage will harm this level of trust and may make a lender unwilling to consider a situation where previous arrears (mortgage of other) exist.

This area is however, to varied to make a blanket statement regarding a lenders attitude in this area. Bond Financial Limited will ensure, in their negotiations with lenders, that cases will be considered sympathetically and on an individual basis and where possible we will indicate if an agreement has been reached with the lender to cover this issue within the product criteria of a mortgage offer.

Recently Self Employed

Starting your own business is probably one of the most exciting things that anyone can do. Along with the excitement however come a set of stresses and problems that you may not have experienced before and in many cases only effect the self employed.

You may need to raise capital to help your business grow or expand, the initial costs may have exceeded your expectation or indeed the business levels you are experiencing mean that you will have to expand more quickly than you thought to keep pace with growth. Amazing but true – More new businesses fail through the cash flow problems caused by overtrading (too much business) than fail through insufficient demand.

Being new to self employment will mean that you will likely not qualify for a mortgage through the standard lending criteria of most high street lenders. This does not mean however that you will never be considered, as many lenders have local discretion levels that can approve at normal terms applicants who have been self employed for less than the statutory three year period.

Bond Financial Limited understand the way in which lenders view mortgage applications and appreciate the uncertainty that can sometime effect the self employed. We attempt to determine as fully as possible, during the negotiation of a mortgage offer, the way in which individual applications will be viewed by the lender. To assist you in deciding whether a mortgage offer is right for you on each product profile we insert a “special situations” section which gives a brief overview of the parameters a mortgage lender will consider. Although only a guide these notes should help you in deciding if your own self employment circumstances are suitable for the individual product.

Divorced

There was a time that simply having been divorced would have had a detrimental effect on a persons ability to raise a mortgage. With divorce now so common this is no longer the case and lenders treat applications from divorced customers in the same way as all others.

There are however some particular circumstances that may cause difficulties to divorced applicants. It may be that a person already is party to a mortgage on a previous property or that a commitment to maintenance payments exists. In respect of maintenance payments, a lender will usually make an allowance for these amounts when calculating an applicants income level and this may effect the amount that a person is able to borrow.

As a general rule (although not true of all lenders) the amount of maintenance payments made will be annualised (monthly amount multiplied by 12) and this figure is deducted from the applicants gross annual income. The resulting lower figure is treated as the income of the applicant and maximum borrowing is calculated against a multiple of this lower amount.

Bond Financial Limited are aware that these problems sometimes exist in the mortgage market and, in their negotiations with lenders try to secure as flexible an approach as possible to these situations. In as many instances as possible we will indicate if a lender will consider advances in excess of the normal income multiples. Although only a guide these notes should help you in deciding if your own circumstances are suitable for the individual product listed.

Credit Problems

This is an area which is surprisingly wide. What indeed is a credit problem ?. A general definition would be that a person has, within the last six years, at some stage had problems with meeting on a regular basis one or more of any credit commitments that they have had outstanding.

Looking at this definition it is easy to see that there are credit problems. At the lowest end of the scale a person may have missed a payment on their credit card simply through forgetfulness (this has happened to many of us now and again), is this a credit problem ? In this example, no, but the fact that a payment has been missed will be registered on a persons credit record and this will be accessed by any lender making a decision on a new loan proposition.

At the other extreme a person may have a number of County Court Judgments, defaults or other serious adverse history that, without full and detailed disclosure will certainly adversely effect any mortgage application made.

While special schemes are available to cater for serious adverse credit registered against an applicant there are some golden rules that should be applied by any person considering making an application who is aware of a previous credit problem.

• Always disclose the problem fully at the earliest opportunity (the application).
• Give as much detail regarding the problem to support your argument for acceptance.
• Provide any available documentation to support your claim in respect of subsequent settlement of any outstanding debts.
• After having historic credit problems be extra vigilant in keeping all your affairs fully up to date. A clean current record will go a long way towards helping an application when historic information causes a potential problem.

Bond Financial Limited are aware that these problems exist in the mortgage market and, in their negotiations with lenders look to try and accommodate as many of these situations within standard mortgage products. When it is not possible to do this Bond Financial Limited may negotiate an individual mortgage rate that specifically caters for members with previous credit history problems. To assist you in deciding whether a mortgage offer is right for you, on each product profile we insert a “special situations” section which gives a brief overview of the parameters a mortgage lender will consider. This section will also note if the product itself is designed to cater for specific credit history problems and attempts to quantify the scope that the product will cater for. Although only a guide these notes should help you in deciding if your own credit history circumstances are suitable for the individual product.

Debt Consolidation

Ever felt that the number of credit card and personal loan payments that you are making is restricting your finances? Clearing your unsecured debts and taking advantage of the lower interest rates offered through mortgage advances is often a very cost effective way of reducing your monthly outgoings and getting your finances back on track.

Debt consolidation is one of the most popular uses of remortgage advances and Bond Financial Plc recognise this fact fully. Within each product profile we insert a “special situations” section which gives a brief overview of the parameters a mortgage lender will consider and in respect of remortgage advances, the type of capital raising that will be accepted, including debt consolidation. Although only a guide these notes should help you in deciding if your own circumstances are suitable for the individual product listed.

Short Employment History

One of the major changes that has taken place in social habits over the past decade is the increased mobility of labour. People are far more willing and able to move significant distances to further their careers and with skill levels increasing changing career at some stage is no more the rare occurrence that it used to be.

In general, the average length of time that a person stays in a job is reducing. Mortgage lenders used to take a less than helpful view if a person had been in their current position for less than twelve months, it was considered that job security was adversely effected by a short tenure of position.

This situation is no longer the norm but a short time in a current position can still pose problems for a potential mortgage borrower.

During the early months of a new job an employee may be subject to a probationary period. In this period a lender may still consider that the position is in some long term doubt and there may be a resistance to accept applicants to where this applies.

Bond Financial Limited are aware that a lender may take this view and, in their negotiations with lenders try to secure as flexible an approach as possible to these circumstances. In as many instances as possible we will secure acceptance of probationary periods within the standard underwriting criteria and where this is not the case we will ensure that a lender will give consideration to these circumstances on an “case by case” basis. Where possible we will indicate if an agreement has been reached with the lender to cover this issue within the product criteria of a mortgage offer.

Capital Raising on Buy to Let

With increased property values over the last few years owners of let properties have also seen their investments increase significantly in value. Although a situation that is welcomed it is sometimes difficult to arrange a capital raising advance against a property which is already let out.

While lenders are now becoming used to considering requests to purchase a property to let, the market is still relatively new and so remortgage requests, especially those that require a capital raising element, are still relatively rare. Because of this and the perceived extra risk associated with both buy to let mortgages and capital raising exercises finding a lender willing to undertake this sort of advance can sometimes be difficult.

Bond Financial Limited are aware that these problems sometimes exist in the mortgage market and, in their negotiations with lenders try to secure as flexible an approach as possible to these situations. Where we negotiate a mortgage offer that will accommodate buy to let mortgages we will make clear, within the product details, if capital raising is permitted within standard criteria or if will be considered on an individual basis.