 |
|
|
|
|
|
|
Contact us | www.future-financial.co.uk | E-mail your comments | Archive | |
|
|
|
|
|
|
|
|
|
The end of self-certification? The regulators are suggesting an end to the system whereby people could avoid giving lenders evidence of their earnings by opting for a ‘self-certification’ mortgage.
A self-certification mortgage means that the lender accepts the borrower’s word on how much they earn and thus their ability to repay the mortgage rather than demanding formal evidence of income. This type of mortgage helped those without a regular source of income to buy a home more easily, without having to jump through hoops to do so. What is wrong with them? The problem is that this has been open to abuse, with people exaggerating their ability to pay their mortgage and then getting into trouble if expected earnings failed to materialise. This is not necessarily widespread but in the wake of the credit crunch, regulators have apparently decided to tar self-certification mortgages with the same brush as lending to NINJAs (no income, no job or assets) in America. Who will be affected? Not only the self-employed would be affected by this proposal. Anyone who wants to borrow close to the maximum in terms of multiples of earnings could find that new responsibilities on lenders to assess affordability based on the borrower’s free disposable income and borrowing capacity might reduce their ability to obtain a loan. This could adversely hit first-time borrowers as well as those seeking to move up the housing ladder. Is there a solution? It is not clear that this is actually an issue that needs to be addressed. What is clear, however, is that the role of professional mortgage brokers and independent financial advisers is set to become even more important in future. Your home may be repossessed if you do not keep up repayments on your mortgage. Fees for mortgage advice may be charged and for details of these please contact your usual adviser. |
|
|
 |
|
|
|
©futurefinancial This publication represents our understanding of law and Inland Revenue practice as at the date of publication. It does not provide individual tailored investment advice and is for guidance only. Rules may vary for Scotland and Northern Ireland. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. The value of land and buildings is generally a matter of a valuer’s opinion rather than fact. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Your home may be repossessed if you do not keep up repayments on your mortgage. Loans are subject to status and written details are available on request. Always seek independent advice from a qualified financial adviser. Think carefully before securing other debts against your home. Fees for mortgage advice maybe charged and for details of these please contact us. The Financial Services Authority does not regulate all the activities undertaken by the company, including taxation advice and overseas mortgages. |
|