Your search for a mortgage isn’t
yielding results. Check for any impediments. May be the
lenders dread offering credit on the grounds that you
are self employed.
Are you alone in the pursuit? No. The
statistics show the number of self employed people at
around three million. Add to this the people who are working
freelance and those working as temporary hires. They too
are denied mortgages on the same grounds as a self employed.
If the mortgage companies continue their
step motherly attitude towards such a vast group of population,
it is not late when they will lose plenty of their business.
And
what is the basis for such denials.
The most basic reason is that these people do not have
a stable income. The self employed persons, for instance,
may earn a lot one month, and nothing in another. This
increases the chances of defaults or arrears.
Second reason for not allowing them an
access to mortgages is that they get their income from
varied sources, thus making the computation of income
difficult. A freelancer may work for a number of people,
each paying him/ her different remuneration for his services.
Finally these people do not have any means to prove their income
like those who are in full time employment. The salary slip
or P60 forms can prove income of the latter. But there is no
such document for the self employed persons. Audit results of
three previous years would have served the purpose, had accounts
not been fudged to evade tax.
This is where self certified mortgages step
in to provide relief to self employed people. A self certified
mortgage can help self employed and freelancers to draw as much
fund as they like, without having to prove their income. This
includes no dishonest ways and means to prove a larger income.
In this kind of mortgage a customer has to declare income and
no further checks are made. The customer is not required to
put forth any documents to prove his contention. It is his words
that value more.
Self certified mortgages allow borrowers to
take as much as £1 million with 10 – 15% of deposits
(this is dependent on the lenders). Self certified mortgage
carries a higher rate of interest than most of the regular mortgages
because of the increased risk to the mortgage lender.
The amount of money that a customer can borrow
on self certified mortgages is calculated after adding up the
annual income of both customer and his/ her spouse (if both
are working), along with any bonus, commission, and any other
sources of income pertaining to the customer.
Customers should decide how much can they pay
as the monthly installment after making the calculations. They
have to be careful in deciding this. They know their monthly
income and expenditures better than any other person. Both extraordinarily
high installment and an unusually low installment can lead to
problems. In the former case, the borrower is stuck up in the
payment. In the latter, the mortgage takes more time to be repaid.
An average installment, trimming off the fluctuations, should
be the optimum payment.
Customers can have as many choices through
the self certified mortgages as they have on the regular mortgages.
They can have a flexible mortgage wherein they can pay more
in the months when his earnings are increasing. In the months
of depression they can pay less or take a payment holiday. Similarly
the self certified mortgages come with the features of tracker
rates, fixed rates, capped rates and many other interest alternatives.
But the process of self certified mortgages
differs with different lenders. Some lenders may conduct special
enquiries as to the credibility of the customer. Normally banks
may be contacted and accountant details checked. As discussed
earlier about the legality of the purpose, lenders may ask for
proofs if they have any doubts.
It is recommended to take professional advice
regarding the suitability of self certified mortgages for your
income. The customers must choose the mortgage provider properly.
Choose the one who charges the best of rates. Before signing
on any document examine the various clauses properly. It may
have included hefty redemption charges, for instance, to check
the customers from shifting over to a regular mortgage.
James Taylor holds a Master’s degree in Commerce from JNU. He is working as financial consultant for Chance For
Loans. To find debt consolidation loans, debt consolidation loans, cheap rates, personal loans, secured loans, unsecured
loans, improvement loans http://www.chanceforloans.co.uk
