I have always been wary about self-cert mortgages and I don’t like them. I suppose some might say that’s because I like to play it safe. I’m not a gambler by nature and don’t like taking risks.To me, self-cert mortgages are fraught with danger. Pitfalls lie all around, waiting for unsuspecting brokers and clients. Underwriters lurk in the jungle of the criteria undergrowth waiting to pounce on inconsistencies. At every twist and turn through the application process, tripwires are set. One false move and you’re dead. Well that’s my view anyway, but I also believe that self-cert mortgages should have a place in the portfolio of schemes available to clients. Self-cert mortgages fulfil a specific role – the pertinent point is that this role should be niche. Last week I recommended a self-cert mortgage for one of my own clients. She’s an intelligent lady, if financially slightly naive. She has no head for money and has built up fairly large debts, which she now needs to consolidate. The problem is her income comes from various sources and is difficult to verify. It does, however, exist. Nonetheless, under most lenders’ income multiples we need an income stretch. Of course there will be advisers out there who’d suggest that she simply inflate her income figure to fit lenders’ criteria. I hope, and believe, that such intermediaries are a dying breed – the dinosaurs of our industry, heading for a well-deserved early extinction. I will never condone such action but I understand how tempting it might be. After all, it seems so easy. What frightened me most about this client’s story is that she had also been speaking to an adviser who said he could get her the money she needed but only if she agreed to take out a single premium payment protection policy. The cost? A cool 6,000 added to her loan. She wanted to borrow an additional, not insignificant, 20,000. The single premium adds a whopping 30% to the amount she needs to borrow. This is obscene. I realise that for some clients this may be described as their only option, but I cannot see how this level of additional debt can be justified. The so-called advisers who prey on this type of client are either nasty or completely desperate to earn commissions. I’ll be charitable and lean toward the latter as the explanation of what drives them. Back to my client. I was lucky enough to find a lender able to do the necessary without excessive and unwarranted extra cost or poetic licence. A low LTV and a surprisingly strong credit score helped her situation. A good job done from everyone’s perspective. Please don’t think I’m being holier than thou. I’m not perfect, but I’m not a chancer. This may be boring to some but at least I have a clear conscience.
- Top trends
With Christmas fast approaching, consumer debt is likely to be stretched even further than the record levels it is at now. With this in mind it’s important that your clients consider some form of financial protection.
Research from Economic Lifestyle reveals that more than 858,000 adults aged between 35 and 64 now have one or both of their parents living in their home. The phenomenon of 3G families (those with three generations living under the same roof) has been attributed to the financial squeeze faced by the over-65s struggling to maintain […]
means more brokers can see the benefits of loans for clients, it will be good for everyone.” Simon Mouncher, operations director at em-financial, says the regulation of the second charge market by the Financial Services Authority would benefit consumers as well as brokers. He says: “First and second charge lending share a similar market and […]
Tory leadership contenders David Cameron and David Davis will open the CBI’s annual conference in two week’s time, the employers’ organisation has revealed.The event, which takes place at London’s Business Design Centre on November 28 and 29, will provide an opportunity for the Tory leadership hopefuls to address the country’s business leaders just one week […]
By Rebecca Murphy, relationship manager, LendInvest The construction sector offers enormous potential when considering the implication emerging technologies could have on both existing processes and final results. While the completion of an entirely 3D-printed office block may be ‘sexier’ news than a new smart toolbelt that tracks the wearer’s location on site, each area of development […]
News and expert analysis straight to your inboxSign up