Can / should he get a mortgage?

smartpicture

A close friend has been given £30k by his parents to use as a deposit on a house. He's always rented before. He's looking to buy a house at about £120k, but officially only earns about £15k per year as he's self-employed , so presumably would find it difficult to get a mortgage based on his accounts figures. He is confident he can pay back the mortgage amount, and has told me that he plans to self-certificate that he earns a higher figure to get the mortgage.

I've warned him that mortgage companies are not throwing money around nowadays, and that lying on a mortgage application form could be asking for trouble later, but he says loads of people do it without a problem. So, firstly, do you think he can get a mortgage on a self-certification basis in today's market? Secondly, what risks is he running by lying on the application form? Any other advice?

herbiesjp

smartpicture wrote: »

He is confident he can pay back the mortgage amount, and has told me that he plans to self-certificate that he earns a higher figure to get the mortgage.

That is mortgage fraud - simple as that

Risks involve prison and fines

_Andy_

Sorry to be blunt about it, but if he wants to commit fraud then he's pretty damn stupid. Whether other people do it isn't relevant.

herbiesjp

Can his parents act as guarantors - if he wants to get a mortgage via a legal route?

smartpicture

That's pretty much what I thought, so I'm worried for him. Are mortgage companies known to take action on this sort of fraud? He says so long as he pays his mortgage every month they're never going to find out.

His parents are retired so can't act as guarantors as they have no income, the deposit money came from selling his grans house when she died. He did ask me to come in with him on a joint mortgage basis (as I would have no trouble getting a mortgage), then he would pay the mortgage in full every month while living in the house and I would benefit from the increase in the house price without paying any actual money. I refused as the whole thing made me very uneasy.

Anyway, it's all academic if he isn't able to get a mortgage on his own - any thoughts on whether self-certification mortgages like this are still on offer?

koexelek

smartpicture wrote: »

He did ask me to come in with him on a joint mortgage basis (as I would have no trouble getting a mortgage), then he would pay the mortgage in full every month while living in the house and I would benefit from the increase in the house price without paying any actual money.

... and also share in any house price decrease :rolleyes:

smartpicture

koexelek wrote: »

... and also share in any house price decrease :rolleyes:

I guess a house price decrease wouldn't have affected me if I wasn't putting any money in. I was more worried that he would find himself unable to pay the mortgage and they would then come after me, as I have assets and he doesn't. Also, if he has no qualms about lying on the application like this, and presumably lying about his earnings to his accountant / taxman, I wondered how much I could trust him to be honest with me on financial matters.

I still worry that he's jumping into a dangerous place - but then, he's always been someone who lands on his feet, and I've always been over-cautious and lived by the rules, so I guess it's up to him.

koexelek

smartpicture wrote: »

I still worry that he's jumping into a dangerous place - but then, he's always been someone who lands on his feet, and I've always been over-cautious and lived by the rules, so I guess it's up to him.

Any idea of what he really earns ?

You say officially £15k, but does he earn a lot more and just not declare it to the taxman ?

herbiesjp

koexelek wrote: »

You say officially £15k, but does he earn a lot more and just not declare it to the taxman ?

That would be tax evasion - so he might get caught out on that front as well

koexelek

herbiesjp wrote: »

That would be tax evasion - so he might get caught out on that front as well

You're right.

He must have more income coming in than £15k though. Anyone trying to borrow £90k on that income would be crazy

mic200202

The self certification option is commonly used by self employed when thier current earnings are not reflected in the latest accounts available.There can be many reasons why this may happen. He needs to self declare his current (net profit) earnings to the lender. I have, howvever,seen many self employed where they completely misunderstand the gross / net earnings requirements,and because employed people use their gross earnings assume they can do the same. You pal has to declare what his current net profit is.It is quite a different case if he is just making up an income with no basis in fact, irrespect of affordability.