When it comes to mortgages, more and more borrowers are being left behind by high street lenders. As a result, specialist mortgages are becoming increasingly popular for those who need tailored lending solutions.
Borrowers who fall outside of stereotypical lending criteria can struggle to get appropriate financial advice from mainstream lenders, who will reduce their risk by creating a more automated method of underwriting. This ‘tick-box’ approach rules out countless potential applications and does not account for individual circumstances.
There are several groups whose circumstances mean they don’t meet standard lending criteria. This is where the specialist lending market could provide a solution. In fact, referrals to specialist lenders have increased by 34% in the last 12 months, increasing to a whopping 94% when a high street lender has rejected a client.
The Problem
If you fall into one of the following categories, there are several challenges you may face when looking and applying for a mortgage.
Self-Employed
Many mainstream providers have designed products around the PAYE format; yet, 15% of the UK’s workforce are self-employed. Every lender has a different approach to calculate affordability. Some use their own model to determine your maximum mortgage amount and others have a more traditional income multiple model.
Contractors
Freelancers and contractors often have fluctuating income and multiple income streams. If you are on a temporary or short-term contract, you are likely to be considered a higher risk for a mortgage. There are some lenders who will be willing to work with you, even with your income jumping around. The trick is knowing who to approach for contractor mortgages.
Low Credit Score
Lenders who provide mortgages to people with poor credit are somewhat lacking, so there are fewer options to choose between. The mortgages that are available tend to be more expensive as lenders will charge significantly higher interest rates to cover the additional risk involved, and a higher deposit may be required. It is important to look at all options very carefully and planning ahead can significantly improve your chance of getting the best solution in place.
High Risk Occupations
Professions such as healthcare and essential emergency services aren’t 9-to-5 jobs, so issues like a second income and overtime must come into play when assessing what you can afford. High street lenders don’t have the time or processes in place to evaluate this type of application in the same way an independent broker will.
Later Life Borrowers
People are living longer and as a result, may work beyond the traditional retirement age and need more sources of income to fund their later years. Affordability is the main concern for older borrowers as income generally decreases on retirement, but there are also other factors to consider.
The Potential Solution
There is no ‘one-size-fits-all’ for getting the best mortgage as each situation is unique, and none more so than in these groups. Here are some tips to help you obtain the right mortgage.
Self-Employed
For self-employed mortgages, the most important thing to do is prepare your documentation. Many lenders won’t accept your application unless you own at least 20% of the business that provides your main source of income. You will also generally need to provide proof of income for the last two tax years – both your financial accounts and tax calculations.
Contractors
Freelancers and contractors need to have proof of income lined up before they talk to a broker. You will need at least a year’s worth of contracts, including your day rate, signed off by your employers. If this is not possible then personal tax returns are crucial. Rolling contracts can be accepted as part of an application.
Low Credit Customers
Applying for a mortgage with poor credit can feel incredibly daunting. Try to build up your credit score – a credit-building credit card can help with this, and you should also consider applying for the government’s ‘help to buy’ scheme to aid your deposit. But first and foremost? Talk to an expert. A specialist mortgage broker may have a product that works for you that can’t be found on the high street.
Higher Risk Occupations
To find the best mortgages for police officers, emergency personnel and other high-risk occupations, by far the best thing to do is research. Who has the expertise to understand your pay structure? Who can provide ‘out of hours’ services to fit with your unsociable hours? Most crucially, who will have the knowledge of which lenders can provide competitive mortgage deals despite the complexities of your case?
Later Life Borrowers
Later life borrowers may still need to be receiving a pension – be it state, private or workplace – and the property in question needs to be, either now or in the future, your main residence. Take into consideration factors like inheritance – how much do you want to leave behind for your loved ones? Borrowing money could have an impact on your tax position and state benefits. You may also want to consider downsizing or using your savings before making your final decision.
Why Choose Access?
At Access Financial Services, specialist finance is an essential part to what we do. Our network of lenders have unique products that enable us to solve problems that occur in people’s everyday lives. We have a thorough understanding of lending criteria, which combined with our expertise, means we can improve your chances of securing the best mortgage for your personal circumstances to accommodate both your current needs and your future aspirations.
No matter what your financial situation is, use our mortgage calculator to determine how we can best help you. We will advise you as quickly as possible about whether you can get a mortgage, with the aim to obtain the most competitive mortgage deal for you.
Your Home is at risk if you do not keep up repayments on your mortgage or any other loan secured on it. Under no circumstances should any of the information contained within this email be construed as “advice”. You should seek professional advice in respect of your own circumstances.
