The document advises potential borrowers of the risks of borrowing a large amount of money and offers tips on ensuring that their mortgage is affordable, before asking them to sign a statement declaring that the information they have provided is accurate and they can afford the repayments.
The disclaimer has been introduced in reaction to the increase in self-certification mortgages, used by freelance, contract, part-time and other workers who cannot document their income to secure a mortgage. However with only minimum credit checks, the self-certification mortgage potentially enables some homebuyers to over-state their income in order to secure a larger mortgage, increasing the risk of defaulting if future payments then become unaffordable.
Mortgage Advice Bureau's Chief Executive, Peter Brodnicki commented: "With house prices increasing in recent years, many potential buyers risk overstretching their borrowing to afford their dream property. This self-cert disclaimer, just enhances an already very rigorous and responsible sales process, which all our advisors adhere to, by demonstrating the potential pitfalls of over borrowing."
Mortgage Advice Bureau's tips on responsible borrowing
· Don't over-commit yourself and make sure that you can cope with the higher re-payments if interest rates continue to rise and/or the fixed, discount or tracker rate ends
· Don't withhold information on commitments or exaggerate income
· Remember that taking on additional financial commitments during the mortgage term without a corresponding increase in income or a reduction in spending could affect your ability to meet your commitments
· Make sure you have access to some cash for emergencies
· Set yourself a realistic budget and implement it
· Remember that you may be able to protect your income and that Income Protection, ill health and redundancy insurance are important to give you peace of mind
· You may have other credit debts which if left unmanaged can put added pressure on your finances
· Remember that low levels of interest and unemployment may not be sustainable over the mortgage term
For further information on Mortgage Advice Bureau visit www.mortgageadvicebureau.com or contact 01332 200020.
