Self-certification mortgages set to be axed

maro11

Heard this on the radio this evening.
http://www.guardian.co.uk/money/2009/oct/13/self-certification-mortgages-axed

maninthestreet

Aren't there are only 2 of these mortgages available now, and they are both offered by Platform? But making applicants prove their level of income will, hopefully, stop these mortgages making a comeback.

koexelek

I thought they had all been axed about 6 months ago ?

Unless you wanted to pay 30% interest, put down a 99% deposit and were pepared to go with a lender you'd never heard of :rotfl:

Leon_W

As koexelek says, these have been pretty much unavailable for months now. With The Mortgage Works now gone the only mortgage I have available on a Self cert basis is with Platform at 6.84% for a 2 or 3 year fix with a maximum LTV of 65%. That's it, and it won't be around for long now in my view anyway.

This does however leave some genuine problems.

Very few people these days get nice crisp and clean payslips with the same pay every single month. Most people have fairly irregular income with maybe a basic salary, bonuses, commissions, overtime and all manner of allowances + state benefits etc that make coming to a definitive income figure very difficult. And that's just the employed !

We also have self employed, contracted, freelance and purely commission based workers who will now find it incredibly difficult to get any sort of mortgage at all unless the accounts are squeaky clean. And therein lies another problem, the age old story of accountants trying to ensure that all reliefs are used to reduce net profit and tax has a detrimental effect on these peoples borrowing capacity even though they can comfortably afford it. Also most lenders still want 3 years figures so forget buying if you've just gone self employed for a very long time indeed.

The knock on is that it stifles the self employed entreprenurial spirit as nobody would want to take the chance of a leap in the dark and make a go of it for themselves if they knew it would possibly prevent them obtaining any sort of mortgage finance for 3 or 4 years.

In my view lenders will have to take a more flexible approach to evidence of income as things are just too rigid to accomodate the groups of people above fairly at this point in time.

Regards

maninthestreet

Leon_W wrote: »

We also have self employed, contracted, freelance and purely commission based workers who will now find it incredibly difficult to get any sort of mortgage at all unless the accounts are squeaky clean. And therein lies another problem, the age old story of accountants trying to ensure that all reliefs are used to reduce net profit and tax has a detrimental effect on these peoples borrowing capacity even though they can comfortably afford it.

They can't have their cake and eat it i.e low income for tax purposes, but at the same time a much higher income when it comes to applying for a mortgage.

Leon_W

Yes they can.

I'm not talking of tax avoidance, I'm talking of legitimate and legal rules on taxation which ensure you only pay as much tax as necessary. This perfectly legal practice often results in a net profit figure which does not reflect the circumstances.

Also, most lenders take this NET self employed figure and apply the same multiples as they would do to a GROSS employed figure. Double Whammy !

maninthestreet

Leon_W wrote: »

Yes they can.

I'm not talking of tax avoidance, I'm talking of legitimate and legal rules on taxation which ensure you only pay as much tax as necessary. This perfectly legal practice often results in a net profit figure which does not reflect the circumstances.

Also, most lenders take this NET self employed figure and apply the same multiples as they would do to a GROSS employed figure. Double Whammy !

They can't have different levels of income depending on who they are dealing with - just like the rest of us who are not self-employed.