Niche lenders such as The Mortgage Lender and Foundation Home Loans are trying new affordability boundaries and products designed to help professionals, self-employed people and, people with more complex income sources to get a mortgage.
It’s no secret that banks and building societies prefer their customers to be straight forward. A mortgage underwriter for a high street bank wants a client with a clear work history spanning several years. They often want to see a clear career progression path and a steady consistent salary which can be easily evidenced and audited to avoid any potential lending risks. Realistically this is not the case for a large amount of UK mortgage customers. Gone are the prehistoric days of pre-determined career paths and many income sources are not straight forward. We no longer necessarily expect a clear path of progression in our jobs and with more people deciding to go self-employed or receiving income from several different sources, we revel in the uncertainty and excitement of building our own businesses and seeing where they take us. For self-employed people, showing income to a mortgage lender can be a bit of a minefield and for people like contractors, explaining more complex income types can drive you up the wall.
“Real Life Mortgage Lender”
Self-described “Real Life” mortgage lender The Mortgage Lender is introducing a new mortgage category called RL0, with fixed rates from 2.84%. This product is available across purchase and remortgages and is designed specifically for mortgage customers with complex income types who, because of their employment or self-employment circumstances, may find it difficult to pass mortgage underwriting with high street lenders.
Steve Griffiths, Sales & Product Director at The Mortgage Lender has said: “The self-employed and those with untraditional income streams are becoming more and more common in the UK- but the lending industry has failed to adapt as quickly to this trend. Our new RL0 product range will offer competitive pricing for borrowers that don’t have adverse credit history but do have complex incomes. We are pleased to be supporting these customers by taking a Real-Life approach to affordability such as using pre-covid accounts where appropriate, as well as 100% of bonus and overtime for employed borrowers.”
Another specialist lender Foundation Home Loans have also taken the initiative to specifically help professionals (young and more experienced) who may struggle with the more mainstream banks. To put this in context, someone in their first year working their way to become a legal professional would traditionally come under scrutiny from several mortgage lenders due to the length of time in the job and underwriters not being able to see a stable job history. Foundation Home Loans have identified that this approach will alienate a lot of potential mortgage customers with strong career progression in their future, so they have launched a new range of mortgages with enhanced loan-to-income multiples aimed at borrowers working in professions with good career prospects.
“Six times income”
This promising new range allows the lender to potentially lend up to six times their annual income (up from the usual 4.5 – 5 times income offered by most banks) reflecting a loan based more on their potential future earnings in their profession rather than current earnings. Some of the eligible professions for the scheme are people working in accounting, actuarial, medical, legal, surveying, architecture, or engineering professions.
George Gee, commercial director at Foundation Home Loans, has said: “Foundation Home Loans is committed to continuously developing and widening its proposition to cater for different types of borrowers with complex needs. We have the expertise to individually assess incomes and we can, for some clients such as professionals, apply enhanced multiples. We believe these products offer an additional choice to borrowers who have secured their professional qualifications. The enhanced income multiple we are able to use for these borrowers should allow them to access a wider range of property options.”
We at Oportfolio see these new announcements as a great step forward for mortgage lending and we love to see the market opening for more and more customers. If you or someone you know is self-employed or their income isn’t completely straight forward, please give us a call on 02073715063 to speak to a member of our team.