David Connolly is head of new product development at GE Money Home Lending
“With today’s more sophisticated market, self-certification is offered on a wide range of mortgages for specific customer requirements. As Barry has 25 per cent of the capital needed to purchase the property, he should have access to a number of options with most lenders offering a loan-to-value (LTV) of between 75 and 85 per cent.
Self-cert mortgages are available with a number of non-standard lenders and the deals are becoming increasingly competitive. For example, GE Money Home Lending offers a range of self-certification mortgages with rates starting from 4.24 per cent.
As Barry is looking for a self-cert mortgage he may be required to provide a limited amount of documentation to support his assessment such as an accountancy statement or previous bank statements. He may also be required to show proof of previous mortgage payments or a rental reference. Given that he hasn’t held a mortgage for eight years he may need to provide evidence of rental payments made in the meantime.
Barry should bear in mind a flexible lender will consider a loan based on what it feels he can afford, whereas a more cautious lender will take a balanced view on what he can afford. Speaking to an adviser will ensure he gets the best product available to him.”
Ramona Leavers is head of marketing at All Types of Mortgages (AToM)
“Barry would probably be considered as a first-time buyer (FTB) because he has not held a mortgage for eight years. However, it is not made clear whether the reason he has not held a mortgage is because his property is unencumbered, or whether it’s a previous property that has been sold.
Barry is looking for a large loan amount. Lenders may have concerns over the fact that Barry is effectively a FTB looking for a self-cert mortgage. Generally lenders limit the loan size they offer FTBs.
The Mortgage Business (TMB) will consider this case on a self-cert basis using affordability calculations (up to a maximum of £1m). This would require Barry to increase his existing deposit by £125,000. However, as Barry is a property developer he may have additional unencumbered properties that can be brought into the equation to help him raise the extra funding he needs. The most competitive rate with TMB is a 5.24 per cent tracker which tracks Bank of England Base Rate by 0.74 per cent. This reverts to 5.49 per cent and has a 0.25 per cent completion fee based on the loan size, which can be added to the loan. This mortgage product also carries a 1 per cent redemption penalty until September 2007.
The other option is for Barry to prove income. Lenders are now offering enhanced income multiples and affordability calculators which enable higher borrowing.
AToM could place the case on a full-status basis with a few lenders. One of them would be Unity Homeloans. It would offer up to four times single income and offer a two-year fixed rate of 5.95 per cent reverting to BBR plus 2.50 per cent. This would require proof of an income of £281,250.
Another alternative may be Abbey on a full-status basis. It has a 4.54 per cent fixed rate to 02/07/2008, which reverts to Abbey’s SVR.”
Andrew Oakes is head of intermediary sales at Cheshire Building Society
“Barry’s financial position and background would clearly need to be investigated further. One of the initial issues he will face is his requirement for self-certification for such a large loan size. The problem here is that most lenders do not offer self-certification beyond £500,000, so he will find it much more difficult to source the product of his choice and obtain the size of loan he is seeking on a self-certification basis. Two options to consider would be a full-status mortgage or raising a larger deposit, both of which would improve his options.
If Barry decided to go for a full-status mortgage, the mortgage provider would need to know details about his business and personal finances, for example, how many years has he worked as a property developer, how many years profit and loss accounts are available, consistency of trading, current abode, current equity, commitments outside of mortgage, and so on.
Given that he is a property developer but has not had a mortgage of his own for the past eight years, it would be necessary to establish whether the property being purchased is intended for his own personal occupation. At this stage there would be some reasonable doubt as to the potential longevity of any proposed mortgage, which may not be in keeping with some lenders criteria.
Considering the amount of money that Barry wants to borrow, it is unlikely that self-cert would be considered, however, the case would certainly be worthy of further consideration on a full status enquiry due to his income level and potential value of the property.”
