If you’re self-employed, a contract worker, have a poor credit history, divorced or looking to lend later in life, you may find yourself amongst the growing number of ‘mortgage misfits.’ Even people with a very good credit rating can find themselves falling between the cracks when it comes to meeting the increasingly tough borrowing obligations imposed by some lenders.
Buying a new home or remortgaging an existing property can prove difficult for anybody, let alone those of you who don’t fit the typical lending mould. However, there’s new hope as many of the ‘specialist lenders’ whose complex credit products are only accessible via a mortgage intermediary such as Ingard Financial, have recognised that the world has evolved. They have adapted their approach and increased their lending flexibility to keep pace with the increasingly diverse range of individual borrower’s financial situations.
Below we explore some of the common ‘mortgage misfit’ groups and the specialist lenders offering potential solutions.
Newly self-employed or irregular (complex) income
If you’re one of the 4.6million self-employed people in the UK1, it’s not uncommon for a lender to want to see two, or even three-years proof of earnings (SA302). This can leave you on a sticky wicket, particularly if you’re newly self-employed. However, with 15% of UK workers now in self-employment – a 40-year high, lenders have had to adapt. Precise Mortgages, for example, has developed a product range specifically for the self-employed, in which they accept just 1-year of accounts, with no minimum trading period.
Perhaps you work in a sales position, earning a relatively modest base income which is supplemented by a generous bonus or commission payments that far exceed your basic pay? Or, you may have a fulltime job, but top-up your earnings through part-time work. Frustratingly, you may have found yourself working all of the hours around the clock to secure the home of your dreams, for your efforts to pale into insignificance thanks to a particular lender not taking bonuses or additional sources of income into account, therefore restricting the amount you can borrow.
In recent years, modern working practices have led to an explosion in zero hours contracts and commission-based jobs. On a much more positive note, this has led lenders to take a more pragmatic approach to complex and mixed sources of income. For example, specialist lender, Kensington, now considers up to 100% of overtime and bonus earnings for all mortgage applications. Furthermore, every case is individually assessed by a ‘human’ underwriter with many years of experience – not a computer! The forward-thinking lender has also introduced a ‘Hero Mortgage’ range for individuals who provide a vital community service, such as members of the armed forces and NHS clinicians.
The Older Borrower
It’s a proven fact – we’re living and therefore working much longer. Therefore, many individuals now want to buy properties later in life, meaning that a mortgage-term could, potentially, stretch into retirement. Historically, lenders have been unwilling to approve an application if it means that you will still be paying your mortgage off after the age of 70, as they assume that your income will fall.
If you’ve been shocked to be told by a high-street lender that you’re ‘too old’ for a loan (bearing in mind that some 40-somethings have been turned away because their mortgage term will take them past the age of 65), you will be pleased to learn that lenders are now taking a much more flexible and competitively priced approach to later life lending. They’ve had to in order to meet market demand – according to the Department of Work and Pensions, the number of people working beyond the retirement age of 65 has increased from 272,000 in 1997 to 1.2m in 2017. This upward trend looks set to continue as many people look to top up their pension savings or enjoy the health and social benefits associated with working into retirement.
Several lenders in particular are leading the way in their approach to ‘older borrowers,’ including Metro Bank, who recently extended their maximum age at the end of the mortgage term to 80 and The Family Building Society who openly state they ‘do not make age the ultimate factor in their decision to lend,’ and offer generous terms for older borrowers, such as Owner Occupier Repayment mortgages in which they can lend up to a maximum age of 95 at the end of the term. They also consider earned income up to the age of 70 and pension income beyond that. Last year, Aldermore also launched a new range of products specifically aimed at applicants aged from 55 – 85, with terms up to the age of 99. Aldermore also allow multiple sources of pension income to assist with affordability.
Whilst it’s not the cheeriest of subjects, the Office for National Statistics estimates that 42% of marriages now end in divorce. Often the main resulting financial problem associated divorce is the split of mortgage liability on a jointly owned property. Ordinarily, the loan needs to be taken on by one of the borrowers, however, the lender needs to be sure that one of the parties can afford the mortgage – this can prove challenging when a mortgage was underwritten on the basis of two incomes and particularly tricky when maintenance is the sole source of income for one party.
Lenders are now recognising that this is an underserved area and are becoming increasingly innovative with their solutions. Principality, the UK’s 6th largest building society, now allows borrowers to purchase a new property, whilst remaining on their original mortgage. In another example, Ingard recently worked with Metro Bank to help a mother of two going through a divorce. She wanted to purchase a home but was only able to work part-time as she was the primary carer for her young children. Costly childcare fees and a part-time income meant she failed several lenders’ affordability calculations. Ingard and Metro Bank provided a flexible solution that permitted her brother to go on the mortgage as joint borrower, whilst only she would be named on the property deeds.
As you’ve read, the world is evolving, and the profile of the ‘average’ borrower is becoming increasingly diverse. Thankfully lenders have recognised this and are adapting. At Ingard, we believe that getting a mortgage shouldn’t be a box ticking exercise but should be based on the financial reality of every individual’s financial situation – people should be at the heart of the decision-making process.
Applying for a mortgage can be stressful enough at the best of times but getting rejected by a lender can exacerbate the challenge even further. That’s why it’s crucial that you work with a whole of market specialist, like Ingard. Whilst you might not have heard of some of the lenders mentioned above, we make it our responsibility to provide you with access to all the products available on the market in order to find the solution best suited to your personal situation. We understand that real life happens and we’re proud of our open-door approach in which we make it our mission to explore every possible option to help you realise your dreams.
From first-time and Limited Company mortgages, through to commercial loans, development finance, life insurance and much more, the friendly team at Ingard is always on-hand to provide free, no-obligation whole-of-market advice. Please call our specialist team on 01702 533 400 or click here to arrange a call-back.