| Getting a mortgage if you are self-employed, work on contract or have an impaired credit record is not as hard as it used to be. |
| Self-certification mortgage |
|
If you don’t like the sound of a self-certified mortgage and want to go for a more conventional loan there are some obstables: |
| Self-employed If you haven’t been self-employed for very long you will probably find it hard to get a loan until you have established yourself, unless you have gone into a business in which you are already experienced and can demonstrate a track record. Lenders will generally want to see three years of accounts to prove your income before deciding whether to offer you a loan. But they are gradually getting more relaxed about this sector of the economy, and some lenders are happy with 12 months of accounts. One common problem if you are self-employed is that your accounts are likely to understate the profits from your business, for perfectly legitimate reasons. That cuts down the amount you can borrow. One way around this is to opt for a self-certification loan, where you state what your income is, but do not have to prove it. This type of loan is generally more expensive than conventional loans, and has the added drawback that you may not be able to borrow as large a proportion of the property’s value. |
| Contract workers Contract workers may have to shop around to find a lender willing to take them on, or use a mortgage broker who will know which lenders to approach. Some lenders will want to see that your contract has been renewed regularly over a one or two year period. Others may be happy if your contract has been renewed once by the same employer. |
| Mortgage arrears You may be turned down for a mortgage if you have fallen behind with your payments on a previous loan. Lenders conduct a credit search to discover your credit history, and often use a system of credit scoring to assess your creditworthiness. If you don’t get enough points you could be refused a loan, and mortgage arrears will obviously affect your score. Many lenders will lend to people with a history of mortgage arrears, but only under certain conditions. They may limit the proportion of the property value they are prepared to lend, and specify a maximum number of months’ arrears, typically three or six months. They may also refuse to consider your application if the arrears occurred within a specified time period, for example, within the last 12 months. You may have to turn to specialist lenders if you cannot meet the conditions demanded by mainstream lenders. But that will generally mean having to pay a higher rate of interest. You can take a look at the conditions specified by lenders if you select the ‘arrears’ category of mortgages in the mortgage tables and click through to each lender’s details. |
| County court judgements County court judgements or CCJs are issued for unpaid debt. They stay on your credit reference file for six years from the date of the judgement, or until the debt is paid off. If you cleared the debt more than a year ago, you stand a good chance of getting a mortgage from mainstream lenders. You are likely to find it harder if you paid it off more recently. And if it is still unpaid, you will generally be refused a mortgage by high street lenders. Specialist lenders may offer you a loan, but on uncompetitive terms. You can take a look at the conditions specified by lenders for CCJs if you select the CCJs category of mortgages in the mortgage tables and click through to each lenders’ details. |
| Checking your credit history If you want to check your credit rating, send your name and address, together with a cheque or postal order for £2.50 and a list of your previous addresses over the last six years, to each of the agencies at: Equifax, Credit File Advice Centre, PO Box 3001, Glasgow, G81 2DT, and Experian, Consumer Help Service, P.O. Box 8000, Nottingham, NG1 5GX. |
YOUR MONEY
