The End of Self Certified Mortgages?

Wednesday, October 21st, 2009 | View from the Top | No Comments

The FSA has signaled its intention to end the option of self certifying income on a mortgage application. This announcement has caused concern amongst borrowers, some of whom may be effectively forced to stay in their current home and as such has not helped improve the housing market.

After the market turmoil of the last 2 years it is a surprise that this area did not come under focus sooner, but the solution of a complete ban may turn out to be the proverbial “hammer to crack a nut”.

From a lenders perspective, it makes sense to ensure that a borrower can afford to make the payments on their mortgage and that this income has been legitimately obtained.  If they do not check this affordability then they only have themselves to blame if the loan goes bad. However the change in regulation is proposed by the FSA and not the lenders, who continue to offer self cert mortgages, albeit in reduced numbers, at the time of writing.

It is likely that the new regulations will make it very difficult for lenders to provide creative products for borrowers who have a genuine difficulty in proving all sources of income to the satisfaction of a “lending official”. This will be particularly true if the method of proof is prescribed by Government bodies.

Self Certified mortgages, used correctly, have been a perfectly acceptable method of borrowing; they have been abused by sharp practice amongst mortgage brokers and poor administration by lenders but the risk associated with the reduced paperwork for this type of loan is generally offset by the increased pricing of the product.

There is still time to use the self certification route sensibly and consider other alternatives before legislation forces the point.

Whether you are looking to buy your first home, move house or just ensure that you have the best mortgage deal, my advice is to speak to an independent broker as a matter of urgency to review your options and make a fast decision on what to do before new regulation is implemented.

0845 30 50 222

http://news.bbc.co.uk/1/hi/business/8313853.stm

Tags: Adviser, borrow, FSA, Interest Rates, legislation, mortgage, mortgage broker, self cert, self cert mortgage, self certified mortgage

Stealth Tax continues to rise

Thursday, September 24th, 2009 | View from the Top | No Comments

You could argue that the recent proposals from Vince Cable are far from “stealthy”, but they underline the point that all parties are seeking ways of spanning the enormous deficit the next Government faces.

Whether it’s appropriate to coin some additional revenue from those with more valuable houses or, indeed, persons with a phone line is hotly debated across the country. The point is more whether the beleaguered UK citizen is suitably prepared in their financial affairs generally, which makes a rise elsewhere easier to absorb.

There is a wealth of information on the web available to DIY-your-finances, but it is often inconsistent or not specific enough to an individuals circumstances.

With Pension reforms around the corner employers and employees alike would be wise to have a Financial “Healthcheck”. You may be surprised how much better off you can be and how quickly you can feel those benefits.

Tags: Adviser, Budget, save money, stealth tax, tax, vince cable

Surviving the Crunch

Monday, March 30th, 2009 | View from the Top | No Comments

Ten Point Checklist to help counter the Credit Crunch

Managing Partner Simon Harris writes:

It depends on where you subscribe, but the current economic difficulties are expected to end somewhere in the next 3 years.

The important point is that all sources report that it WILL end – the Federal Reserve Chairman recently suggested that it may be as soon as the end of 2009. In the light of all published performance indicators this appears optimistic, but if it were true that could lead to a very quick return to positive in the UK thereafter.

In the meantime the majority of people in the UK are waiting for the turnaround, some more concerned about survival than others. Is there anything we can do to improve our circumstances while we wait? This checklist might help to ensure you are in the best position:

1.  Review your savings return.

Most savers have lost out over the past 12 months, but there is no reason to simply accept the rate your current savings institution is offering. There are many ways to invest for a better return, for which seek expert advice from an independent financial adviser.

2.  Can you release equity from your house?

Whether for your own requirements or a family member, it is often possible to release money from your property despite the difficult lending environment. Even if you are not working or have retired there may be a plan to suit you. An independent broker can help further – please resist the temptation to do this on your own as it is now, more than ever before, a specialist field.

3.  Have you made best use of tax allowances?

It is surprising how few people fully utilise the tax allowances available, but then again the information is not always that easy to find or digest. An independent financial adviser can help to ensure that you have used your allowances effectively.

4.  Do you have employment insurance?

Unless you have been notified of redundancy it’s not too late to insure a percentage of your income, protect your mortgage payments or provide a fixed lump sum in the event of redundancy. An independent adviser will find the best policy for your circumstances.

5.  Have you checked your mortgage payments?

Despite the fall in house prices and sales volumes there has been some good news in the falling interest rates for borrowers. There are some excellent savings to be enjoyed, check first with your existing lender to ascertain their best offer and then use an independent broker to compare that to the whole mortgage market for you.

6.  Compare your life insurance.

Rates have fallen over recent years and you may well be able to switch life insurance providers achieving the same (or better) cover for a lower premium.

7.  Review your pension fund.

You may be surprised by the improvements available by changing providers. It is essential to use an independent financial adviser, as pensions can be quite complicated.

8.  Compare your other insurances.

Many people already compare buildings and contents, car, pet and holiday insurances using an Internet comparison website, which often does not present every available option. If you are not doing so, now is a good time to start, or better,  seek help from an independent broker.

9. Are you under notice of redundancy (or feel it’s imminent)?

I. Make sure you know the redundancy procedure at your firm and check that it meets the legal requirements. Try www.direct.gov.uk for more details.

II. Make full use of the £30,000 tax free band for redundancy payments.

III. Consider paying for transitional benefits to be included in your severance package – it may be a lot cheaper that way and buy you some time whilst you look for other work.

IV. Look closely at your pension if funded by your employer – this should also be included in your severance pay and is tax efficient for your employer.

10.  Are you struggling with mortgage or other loan repayments?

I. Never hand back the keys to your house – you will continue to be responsible for the debt and any shortfall after the bank has sold the property. The fees and charges will be significant and lenders will respond more positively to a borrower taking action to address the problem than one who is in denial.

II. Talk to your lender first – whether it’s a secured or unsecured loan you should always contact your lender first to discuss the options that they are prepared to make available to you.

III. Talk to your financial adviser – review your overall financial position with an independent financial adviser, who will introduce you to a debt specialist if appropriate. There may be savings that you have not considered, or different ways to release money from your existing position.

So, in all there are a number of moves you can make to try to keep ahead of things. Many of these points form the basis for an ongoing regime, which your adviser will guide you through as part of your annual review process.

Please telephone 0845 30 50 222 to arrange a free initial appointment.

Tags: Financial News, Interest Rates, Investments, Savings, stock markets