It will not have escaped your attention that lower deposit mortgages are now back which is great news, although due to their higher rates and more stringent criteria only a lucky few may be able to successfully apply, at least for now.
However, for many potential borrowers these mortgages are out of reach for another reason and that’s either because of outstanding credit commitments or minor adverse credit.
Income and credit-related scrutiny has, quite rightly, been ramped up from a lending perspective in recent times and clients must share all relevant financial commitments.
This sounds obvious but we have all experienced instances where missed information has caused major delays further down the line and the need for full transparency is greater than ever.
An area highlighted by one of our top advisers is that clients often overlook student loans as being a credit commitment, as these are automatically deducted from pay packets.
However, most lenders will include this in their affordability calculations.
As a specialist mortgage broker, we’re also seeing a greater proportion of clients who are not only self-employed but who have a non-traditional income history and a variety of income streams. Lenders will have different policies in dealing with such cases.
For example, some lenders will consider people to be self-employed if they are employed by their own limited company and have a greater than 20 per cent shareholding. And it is not always necessary to have two years finalised accounts. So, we need to go far more in-depth when it comes to income-related discussions.
With regards to adverse credit, we’re seeing the next generation of adverse credit coming through and if you ‘cough’ on your phone bill, you could be slapped with a default almost immediately. The biggest increase at the moment we’re seeing is car parking fines. People don’t want to pay a silly little charge because they went into a pet store, and then they’ve got private firms chasing them down.
Unfortunately, things could escalate quickly and before they know it those parking charges are up to £700. The biggest surprise to us is that many people bury their heads in the sand and did not think they could find a mortgage – instead dropping onto the lender’s standard variable rate or just not purchasing the property. This is simply not the case, as there are many options available to such clients and only this month we have launched some exclusive products with a lender specialising in adverse credit applications.
Educating, extracting the right information and managing clients expectations have always been key components within any advice process but this small sample highlights how there is an even greater emphasis on these factors.