Young, Self Employed, No Accounts And No Savings How Did I Get
A Mortgage?

I was having considerable problems getting a mortgage to buy my
first home about four years ago If I was to believe everything
I had heard, I was the ideal candidate for a mortgage – young, a
first-time buyer and with an annual income of about £30k Easy!
No, not easy, actually Being young with a leaning towards
enjoying myself, I had no savings – nothing to use as a deposit
But what about these 100% mortgages I had been hearing about?
Surely I qualified? Oh, there was something else – I was also
self employed with no accounts
Self employed with no accounts and no savings
Could I get a mortgage? It was virtually impossible Not a
single High Street lender would give me a mortgage Even my bank
who have had my services for ten years turned me down; even
though my bank knew exactly how much I earned each year and how
much I spent each week; even though my bank knew that making the
monthly payments on a repayment mortgage would not be an big
problem for me
Then I heard about Self Certification Mortgages
What is a Self Certification Mortgage? It’s essentially a
mortgage whereby you decide whether or not you are capable of
making the repayments And that is when the penny dropped,
because you see the entire process of applying for a mortgage is
premised upon an institution (such as your bank) deciding
whether or not you are able to make the monthly repayments
And what is the formula for working this out? Well, if you are
employed it is your salary – a bank will lend you, say, 3 or 4
times your annual salary Normally they will ask you for a small
deposit, say 5%, to demonstrate that your intentions are
serious
Obviously, if you are self employed, and particularly with no
accounts, you often do not have an annual salary and you are
unable to demonstrate regular monthly income Many self employed
people – notably me – live hand-to-mouth, regularly waiting for
reluctant clients to settle outstanding invoices So how can
your ability to repay a mortgage be judged? I discovered that
self certification was the answer – ie YOU You make a
judgement as to whether or not you are borrowing too much money
and whether or not you will be able to afford the monthly
repayments After all, if you are bright enough to run your own
business, manage your own tax affairs, handle purchasing and
invoicing, surely you are bright enough to work out whether you
can repay your mortgage!
Think about it – conventional, salary-based mortgages are judged
on the basis of what a person has earned in the past, but a
person could be made unemployed within hours of securing a
mortgage On the other hand, Self
Certification puts the onus on you predicting what you will
earn in the future Sure, you could go out of business, but a
salaried person could also lose their job
So I thought, well this is good, but I bet that a Self
Certification Mortgage is the stuff of loan sharks, with
huge interest rates, crushing monthly repayments and
Guantanemo-style penalties
But there was something else I discovered about mortgages
Although the High Street is swamped by lenders, there are only
actually a very small number of ‘actual’ lenders: the majority
are intermediaries acting on their behalf, because the number of
mortgage applications is so great that intermediaries are
required to perform the process of judging each applicant and
assessing risk
So I discovered that whereas a High Street lender would turn me
down, a
smaller lender might accept me But get this: the mortgage
that I actually received from the small lender at the end of the
day was exactly the same as the mortgage which had been refused
me by the High Street lender! Only the forumla for judging my
ability to repay the mortgage was different, not the mortgage
itself!
So what’s the catch with Self Cerftification? There is always a catch
in my experience, and in this instance it was a very big catch
Whereas a regular mortgage requires the borrower to contribute a
deposit of, say, 5%, my Self Certification Mortgage required a
deposit of 15% Fifteen percent!! Of course I can see why they
ask for this, why if you are not being judged using the
conventional formula you are expected to show some serious
committment But I didn’t have any savings I was young and self
employed for crying out loud
So what did I do? Okay, I would not recommend this to everybody,
but I was desperate for my own home and I knew that I could
afford the repayments I took out a Personal
Loan shortly before my mortgage application and,
supplemented with a timely invoice payment, I was able to pay
the deposit and afford the key refurbishment costs on the
property (roof, re-wiring, plumbing etc)
On the High Street this would be called a Home
Improvement Loan and acquired AFTER you have obtained a
mortgage and purchased the property I simply borrowed a little
more in the form of a Personal Loan before I had acquired a
mortgage I was fortunate in that I could afford to carry the
costs of these repayments for the forseeable future and I had
bought on a rising market – the value of my property was already
more than the mortgage and personal loan combined before I had
even finished the refurbishment (ie 4 months after buying the
property) I would not recommend this to everyone, and you have
to be very, very clear about how much you are borrowing and what
the total repayments will be
However, getting on the property ladder and having my own home
was the most important thing to me, and it just goes to show
that if you look beyond the High Street you can actually find
the same or similar financial products but with less of the
hassle The High Street had always made me feel inadequate, a
financial failure
You might be interested to know that, because I was still
looking for the catch in my Self
Certification Mortgage, I went to a respected, independent
financial advisor recently (on the High Street as it happens)
and asked if I should change my mortgage to something better
His advice was that I had got a very good mortgage deal and that
I should stick with it for the forseeable future So I have
Richard

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