Mortgages
Special Circumstances
Please click on the title of the area that you are interested in
from the list below :
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 stable market
for growth in the UK and lenders are once again taking a much more
positive view of self employment and self employed applicants. 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.
KLSA Financial Services Ltd 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 own self employment circumstances are
suitable for the individual
product.
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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.
KLSA Financial Services Ltd 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 KLSA Financial Services Ltd 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.
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Already funding a 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 comes both the remaining loan
and the new advance, within reasonable income multiples, that a new
advance will not be granted.
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.
KLSA Financial Services Ltd 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.
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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.
KLSA Financial Services Ltd 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.
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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 that 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.
KLSA Financial Services Ltd 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.
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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.
KLSA Financial Services Ltd 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.
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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 and 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.
KLSA Financial Services Ltd 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
KLSA Financial Services Ltd 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.
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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 advance 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 KLSA Financial Services Ltd 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.
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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.
KLSA Financial Services Ltd are aware that
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.
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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.
KLSA Financial Services Ltd 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.
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