Self Certified Mortgages A No No For Contractors
This lunchtime The Bank of England once again held the base rate at 0.50%. This was widely expected by analysts as the Bank, The Treasury and the Financial Services Authority (FSA) try to speed up the economic recovery.
Back in October last year the FSA announced plans to ban self-certification mortgages in an attempt to ensure that all borrowers prove their ability to repay in advance.
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This week, industry trade body The Council of Mortgage Lenders (CML) spoke out on behalf of lenders claiming that a ban on so-called “liar loans” and other controversial mortgage lending practices would backfire and have harmful long-term consequences.
The CML is asking the FSA to hold fire on plans to clamp down, arguing that the home loans market had “corrected itself” and there would be no return to the excesses of the past.
Self-certification mortgages were originally aimed at the self-employed and freelance/contract workers who had trouble proving their income.
In its response to the FSA, the CML said many of the problems of the past had been corrected by mortgage firms anyway following a rise in losses and fraud, while self-cert deals had disappeared in response to public criticism. Borrowers, too, were taking a more responsible approach.
The CML have admitted that the case for self-cert mortgages is weak, given the higher level of arrears associated with them and the scale of past abuses.
CML argue that borrowers who might be perfectly capable of running a mortgage but may find it difficult to prove their income could include self-employed people who had recently launched a business but had yet to submit formal accounts; sole traders, contractors, and freelance workers.
Taj Kang, Associate Director at Contractor Mortgages Made Easy (CMME) commented
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This article has been published with permission of Contractor Mortgages Made Easy Contractor Mortgages Made Easy are a whole of market mortgage broker who specialise in securing bespoke Mortgages For Contractors
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Comments
Sorry, but you may not get a response because few (if any) of us know the law that governs mortgages in the UK.
Issuing no-doc or alt-a loans is a thing of the past. That's what got the world into the current financial crisis.
The best you can hope for is called a "hard money" loan. These people figure you probably won't be able to pay it back and the property will have to be foreclosed, so they will loan you only a small percent of the value like 50% of appraised value.
Since I don't know much about London economics, I can not answer you, but here in the US is the time to buy property if you can. But watch out for one thing, don't forget the insurance on rental property is much higher then your normal insurance, I pay for my house about $1,800.00 USD for basic insurance, for every $100K USD my propert is worth (on average) My Rental houses go for about $3,300.00 USD for every $100K they are worth.
Thank about that, its addional $125.00 a month more.
just let you know what i got sticker shocked with when I was 25 doing the same thing.
What about your tax returns? Or bank statements? Any loan officers out there? Not sure if there are even "stated income" loans anymore?
Real estate prices are down…worldwide.. if you're not depending on IMMEDIATE income or PROFITABILITY, it is an excellent time to buy…get into the process, find something respectable and make an offer… and if at first you don't suceed…try again.
All lenders are looking for buyers with down payment money…you should have no trouble.
1. If you want to make comparisons using very accurate data, get quotes from different lenders or brokers on the same day. Mortgage quotes change daily. At times, they even change several times in one day.
2. When you compare terms, compare mortgage quotes for similar lock periods. A lock period is the specific span of time that guarantees implementation of a certain rate. As a rule of thumb, longer lock periods have higher rates. Lock periods are generally offered in increments, like 15, 30, or 60 days.
3. Compare mortgage quotes that have the same points, such as zero or one. In the mortgage business, a point is the term given to a rate. Three points, for example, means three percent. Mortgage quotes follow a tiered pricing. This gives you the opportunity to buy the rate and bring it up or down. How? It's very simple. To make the points decrease, increase the mortgage rate. To make the points increase, reduce the rate.
4. In the quote you ask for, ask that the quote loan be separated from associates fees. Property taxes, home insurance, and pre-paid interest are not lender's fees. What falls under lender's fees are the following: standard title, appraisal fees, and processing or underwriting charges.
5. Compare mortgage quotes of the same type. There are many types of mortgages. There is a buy-to-let mortgage. Then, there are also self-build mortgage, right-to-buy mortgage, and reverse mortgage. The terms of your mortgage could change along with the type.
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