Comments on: Freelance news: The End of Self-Certification Mortgages

By: john

john — Tue, 23 Nov 2010 10:25:00 +0000

The self cert or self certification mortgage was primarily devised as a means to allow self-employed people to get a mortgage to buy their own home. One of the fundamental aspects of any mortgage loan application process is being able to prove your income.

By: mortgages – Yahoo! 404 – Page Not Found

mortgages – Yahoo! 404 – Page Not Found — Thu, 19 Nov 2009 08:47:15 +0000

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By: FPSUmbrella

FPSUmbrella — Thu, 12 Nov 2009 20:36:59 +0000

Indeed, freelancers seem to have been caught in the cross fire as the FSA has been keen to appear to be clamping down on the unruly banking sector. Just when the country needs entrepenuers the most, the net result of the move could be to force them back in to permanent employment to obtain a mortgage.

Although the death of the self-cert mortgage may come as alarming news to many freelancers, it certainly does not have to be the end of home ownership dreams. Those working via some umbrella company can get access to special schemes that ensure they can borrow the same, if not a higher amount, as when they were a permanent employee. Their contract-based income verification allows freelancers to borrow without the high interest rates and fees that were often associated with Self-Cert mortgages and could offer a life line to those temporary workers who are coming to the end of a discounted or fixed term or are looking to purchase a house in the future.

Going directly to a lender and asking for a mortgage based on a contract rate would almost certainly end in failure as they will probably look at the short term contract and assume that the freelancer cannot afford the repayments. However, freelancers with umbrella companies are able to secure a mortgage based on a multiple of their annualised contract rate alone. With schemes available for temporary candidates who are even within the first week of starting their first contract, there is a solution to fit almost all needs.

By: FreelanceAdvisor

FreelanceAdvisor — Wed, 28 Oct 2009 13:23:30 +0000

Yes. That's much clearer :)

By: freelancerfinancials

freelancerfinancials — Fri, 23 Oct 2009 02:40:00 +0000

Don't you mean – If you want a mortgage “get a specialist contractor mortgage broker to secure you a mortgage based on your hourly rate”?

By: Sophie

Sophie — Fri, 23 Oct 2009 02:13:23 +0000

The guys at FMME are great in helping in these situations. Im a Freelancer working in TV production and could'nt get a mortgage until a friend put me in touch with them. Sophie

By: John Yerou

John Yerou — Thu, 22 Oct 2009 21:51:27 +0000

Can't help with the deposit! But can give you or anyone else in a similar situation some advice!

Yes, you're absolutely right Self-Cert mortgages have been priced out of the market, substantial arrangement fees and interest rates much higher than prime mortgages. The few lenders that still offer self-cert mortgages know they have a captured market and are capitalising. 2-years ago you could get a self-cert that was only marginally higher than prime rates. I'm sure given time the rates will come down to more reasonable levels.

As you said, you have 2 years accounts and bank statements to support your application, so indeed you shouldn't have a problem as long as the standard multiple of income applied to your accounts stacks-up to the desired loan you have applied for. Each lender has their preferred assessment criteria, some will look at net profits (this is more desirable), others at drawings (basic salary plus dividends) or may just look at (salary combined with net profits) or in the worse case just salary. For tax reasons, many self-employed freelancers working through a limited company will draw a minimum salary and also restrict dividend payments to avoid higher rate tax. Although this is a perfectly reasonable tax planning strategy it also has the unintended consequence of reducing the amount a contractor is eligible to borrow under the standard criteria used by most mortgage lenders. This is when a specialist mortgage brokers like us can help. Anyway it seems like you're well into the advance stages of the mortgage process so should be ok.

All the best!

By: psilver

psilver — Wed, 21 Oct 2009 17:46:12 +0000

The deals on self cert mortgages have been rubbish for at least the last 18 months, so I don't think a formal closing of the system is going to make that much difference to people getting mortgages, at least at the moment.

I'm in the tail end of getting a mortgage at the moment. I'm a freelancer who does short projects rather than multi-month contracts. For any freelancers interested in it - I had to produce three months statements for personal & business accounts, and two years worth of returns from Ltd company. My other half is in full time work, but is bringing in much less income, I would imagine the banks like the stability/straightfowardness of her work, so I don't know what difference it makes to our application.

The only problem we've had is building up a deposit. At 15% deposit before you get near sensible repayment levels, I'm surprised anyone in full time work can manage to buy anywhere to live at the moment. At least being freelance I was able to save up pretty quickly by taking on more work.

By: Freelance Advisor

Freelance Advisor — Wed, 21 Oct 2009 17:33:30 +0000

The FSA ban on self-cert mortgages may not be bad news for freelancers after all. If you want a mortgage “get a senior underwriters to secure you a mortgage based on your hourly rate”