Dax McLean, Author at Mortgageable

Mortgage with a Debt Management Plan (DMP) UK Guide

by Dax McLeanPosted on 25th June 2021 | Updated 20th January 2023

If you have a less than perfect credit record, including either a history of or a current debt management plan in place, you may wonder if obtaining a mortgage is even possible.

Fortunately it is possible and in this guide, we will cover the journey and the potential stumbling blocks.

We will cover exactly how to seek a mortgage with a history of missed or late repayments, discharged bankruptcy, defaults, CCJs or IVAs, as well as the hurdles that may be faced for a mortgage applicant in this scenario.

Can I Obtain a Mortgage with a Debt Management Plan?

In short, the answer is yes, although as the debt management plan, otherwise known as a DMP, will have impacted the applicant’s credit score, it’s still possible.

However, it’s important to be aware that there is likely to be some consequences such as a higher interest rate on any mortgage offers, or a lower mortgage value offer.

However, there are lenders on the market who specialise in offering mortgages to those applicants who have had or are currently on a DMP.

The best method of finding and approaching such specialised lenders is via an independent mortgage broker.

The broker can also assist with reviewing the potential mortgage applicant’s circumstances to ensure they meet the criteria before approaching a lender.

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What is a Debt Management Plan?

A debt management plan or DMP is an informal repayment agreement between a person and a non-priority debt lender.

Within the personal finance world, debts are categorised between:

Priority debts – Those essential bills that if not paid would result in the loss of a provision for example, if the mortgage or rent is not paid, the consequence would be the repossession or eviction of a property.
Non-priority debts – Those additional credit agreement such as store loans, credit cards or other credit agreements including mobile phone agreements. Non-priority debts are deemed less serious if they default than priority debts.

A DMP can be set up for unsecured, non-priority debts in order to repay the amounts owed via an affordable repayment plan.

A DMP usually involves a company acting as the intermediate party who assists with negotiating with the creditors to set up the plan, as well as streamlining the person’s outgoings.

This allows the amalgamation of the debt repayments into one single monthly affordable payment, which is made to the intermediate company initially, and then they will pay the creditors.

The level of the monthly repayment will be assessed by the intermediate party who will analyse a person’s ability to repay once all essential bills have been deducted from their monthly income.

This includes all living costs such as rent and mortgage, essential bills such as council tax and utility bills.

There is a range of companies that offer to set up DMP’s, however only a handful undertake this service free of charge.

Want a mortgage for a rental property? They work slightly differently to regular residential mortgages, learn all about them in our buy to let mortgages with bad credit.

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It is highly recommended that financial advice is sought ahead of taking out a DMP as there are consequences to selecting this option.

Consumers should be aware that none of the debt is written off when applying a DMP and the interest on the debt is not frozen and therefore by reducing the monthly repayments via a DMP, it can take a significant amount of time to repay the debts.

A DMP is not a legally binding plan and therefore can be stopped at any time by either party.

Also, it is important to be aware that the repayment plan created and offered by the intermediate company can be rejected by the creditors involved.

In addition, another factor to note is that a person’s credit rating will be impacted by the creation of a DMP as the monthly debt repayments will be reduced.

What is the Process of Obtaining a Mortgage with a DMP?

In addition to passing the usual lending criteria when applying for a mortgage, a person with either a current or previous DMP will also be assessed by the lender in relation to how severe the credit issues have been and how recent the issues were.

As we have briefly mentioned, each credit scenario will have a different level of severity on a person’s credit record and credit score.

Another factor on the impact will be the duration of time that has passed since the credit issue took place.

While some issues may be considered less serious such as a late payment, others such as a previous property repossession would be deemed more serious.

In addition, each lender will have varying views and policies on which matters they would consider and which they would not.

Due to the differences between lenders, it is highly recommended that financial advice is sought ahead of any potential mortgage applications.

This is so that the likelihood of being accepted can be discussed and the most appropriate lenders can be approached for the mortgage.

Looking for a commercial mortgage with bad credit? You may be interested in the possibility of shared ownership.

Why is it Trickier to Obtain a Mortgage with a Debt Management Plan?

People with either a current or previous DMP are likely to find obtaining a mortgage more challenging as lenders will deem the applicants as higher risk.

Lenders will analyse the risk factors involved with each mortgage application, and one element reviewed in this process is reviewing the applicant’s credit score and credit history.

The applicants with the highest score may be offered the highest value mortgage possible in accordance with the lender’s borrowing criteria and the most favourable terms.

However, if an applicant has a bad credit history both the value and terms are likely to be tailored due to the risk levels perceived by the lender.

Although it is not impossible to obtain a mortgage with a DMP, there will be fewer lenders willing to make a mortgage offer.

Therefore to protect a credit score from any further damage from possible declined applications, it is important to seek advice before submitting any mortgage applications.

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How Much Could Be Borrowed if I Have or Had a Debt Management Plan?

Each lender will have different criteria regarding how much they may be prepared to lend, however, the calculation will also depend on the property value for the mortgage to be associated with and how much deposit the applicant can put down.

Mortgage with a Debt Management Plan Summary

Our professional and discrete brokers specialise in mortgages with a bad credit history and therefore if you either fall into this category currently or have done in the past, please get in touch so that your options can be discussed.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

How to get a Mortgage on a Low Income

by Dax McLeanPosted on 17th June 2021 | Updated 20th January 2023

Although it is not impossible to get a mortgage on a low income, there may be some difficulties and additional challenges involved.

Potential lenders will need to be comfortable that a mortgage applicant can comfortably meet the monthly repayments before approving a mortgage and therefore the level of income and affordability is critical to the approval process.

Further to their internal checks and processes, lenders are also bound by UK lending regulations that require lenders to obtain proof of earnings as part of the mortgage underwriting process.

Should you be seeking a mortgage on a low income, it would be highly recommended to approach a specialised mortgage broker for all financial options to be reviewed ahead of making a mortgage application.

However, in the meantime, in this post, we will explore the options for obtaining a low-income mortgage as well as discussing some other considerations that may need to be reviewed along the way.

Can I get a Mortgage on a Low Income?

The short answer is yes, it is possible to get a mortgage on a low income, however, there are many factors involved, the total value that a lender is prepared to offer and whether or not the amount will be sufficient to purchase a property within the local area of the applicant’s choosing.

There are many variables that will impact the total amount that a mortgage lender will offer to loan depending on; an applicant’s personal circumstances, the mortgage product chosen including the term of the mortgage, the interest rate, the property value and the value of the deposit.

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Need more help? Check our quick help guides:

As briefly discussed, lenders are required to determine the affordability of applicants as part of the mortgage underwriting process including ensuring that an applicant can comfortably cover the mortgage repayment as well as their household bills and other expenses.

Also, lenders will apply a ‘stress test’ to ensure that applicants could still afford the monthly repayments if their circumstances change or the interest rates were to rise.

In addition to these regulatory checks, mortgage lenders will also have their own borrowing criteria that assess mortgage applicants on other elements such as their credit scores and age.

Each mortgage lender will have different lending criteria and therefore it is recommended that in order to obtain an insight into which lenders would be the most appropriate, seek advice from an independent mortgage advisor

What Types of Income can be used for a Mortgage Application?

Each lender will have different criteria of what types of income they will accept. Some may accept child support or disability benefit whereas others may not.

In addition, if you are self-employed, you may face further challenges as some lenders may not accept low-income self-employed applicants.

What Documentation Can I use to Prove my Income?

You may already be aware that during a mortgage application and underwriting process the applicant will need to provide proof of their income in order for the mortgage application to be reviewed.

In order to do so, documentation will need to be supplied as part of the mortgage application. There are a number of different ways that an applicant can prove their
prove income including by submitting copies of:

Bank statements – commonly three months are required
HMRC documents including SA302 forms
Letters from employers including offer letters
Payslips – commonly the last three months are required and/or P60s
Self Employed accounting documents

How do Mortgage Underwriters Verify an Applicant’s Income?

Lenders will undertake an underwriting process in order to verify the details provided within the application, as well as scoring an applicant against the lender’s internal lending criteria.

The process will vary between lenders including what elements are automatically completed, what details are manually checked and scored and how long the process takes on average.

When lenders complete their underwriting they are reviewing:

The income details provided in the application are supported by evidence
Stability of employment
Affordability checks
Other personal circumstances including details of financial dependents
The credit history of the applicant
The level of deposit and the source of funds
The property related to the mortgage application

As you can see there is a thorough checking and verification process undertaken by lenders and therefore under no circumstances should an applicant provide false information as it will likely get discovered by the lender and the applicant could be charged with fraud.

Related guides:

What Assistance is there for Low-Income Mortgage Applicants?

There is a range of government schemes that a person with a low income may be eligible for such as:

The Help to Buy Scheme – A scheme that provides an equity loan of up to 20% towards the cost of the property while enabling the purchase of a property with only a 5% deposit.
Right to buy Scheme – A scheme that provides the right for council tenants to purchase their council home at a discount.
Shared Ownership – A scheme that enables the part purchase of a property, where the remaining proportion is rented from a council or housing association. There is often the ability to buy further shares of ownership later.

How to Get a Mortgage on a Low Income Summary

In this post, we have discussed the process of obtaining a mortgage on a low income including the documentation needed.

It is worth noting that the total value that a mortgage lender will be prepared to lend will vary depending on a range of factors including personal circumstances, credit history, loan to value rate and age, in addition to the current low-income situation.

Should you wish to discuss your current circumstances and what mortgage options may be available to you, please contact us today to arrange an initial consultation with our mortgage advisors.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

Very Bad Credit Loans Direct Lenders

by Dax McLeanPosted on 17th June 2021 | Updated 20th January 2023

If you have struggled to obtain loans or other financial products in the past, you may have already discovered that bad credit was to blame.

Unfortunately, if you have a less than perfect credit history, this can really impact your ability to secure a range of finance options when needed, including loans.

In this post, we will explore what a credit score is, what bad credit loans are, the common hurdles to securing a loan without a glowing credit history and the considerations that should be made before taking out a loan for those with a bad credit history.

What is a Credit Score?

A credit score is an industry-wide recognised system that assesses how creditworthy an applicant is.

A person’s score is represented as a number often between 300-999 and is calculated by reviewing an individual’s credit history including the following:

Details of open accounts.
Records of payment history on current and previous accounts.
Any information regarding Individual Voluntary Arrangements (IVAs) or bankruptcies.
Details of any financially related links such as previous partners.

The higher a person’s credit score, the more desirable and trustworthy that individual is as a potential customer to a lender. The score enables lenders to preview potential customers track records in order to decide if they fit their lending criteria.

Should you be concerned or interested in your credit score and the details that sit behind the score itself, a free credit report can be obtained from a number of websites.

The information is usually obtained from the UK’s three main credit reference agencies, and it is always recommended that credit reports are obtained regularly to check the accuracy of the information held.

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Recommended reading:

What is deemed a Bad Credit Score?

Unfortunately, there is not a uniform method of setting a score and therefore the major credit reference agencies use a slightly different calculation method to come to their scores. As such, there is not a specific score that is deemed good or bad.

What are Bad Credit Loans?

Loans for those with bad credit a method of funding a large purchase or obtaining a cash lump sum that is repaid monthly during the term of the loan, however depending upon the client’s credit score, this may limit the lenders that will be prepared to offer loans.

Also, it is likely that the interest rate offered on the loan will be higher than the rate that could be offered to those with a good credit score.

If someone with a very bad credit history is seeking a loan, there are other options that may increase the likelihood of a loan being accepted such as:

Secured loans

A type of loan that enables the additional risks of lending to those with a bad credit history, to be offset by offering an asset as collateral. The lender would have the power to repossess the asset in the event that the loan re-payments have defaulted.

Guarantor loans

Another option for those with a bad credit history could be to obtain a guarantor loan where a family member or close friend formally agrees to take on the repayments in the event of a default by the applicant.

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What are Loan Direct Lenders?

There is a range of lenders on the market who may be prepared to lend money such as banks, building societies plus a range of other lenders. Sometimes there are brokers who may act as the middleman, managing the application process, whereas direct lenders do not involve brokers and applicants would need to apply directly to be considered for their services.

The main advantage of using a direct lender is that the process is undertaken all by one company and therefore can be simplified as no other contacts are involved, however, there can also be less transparency when using direct lenders, as for example, the underwriting process is not visible externally and you may not be getting the best rate for your needs and circumstances.

There is a wide range of direct lenders that may consider lending to those with bad credit, including quite a few that specifically market their financial products to those with a bad credit score.

When reviewing the companies offering such products it is important to ensure that a short-listed company is reputable and regulated. Also, be aware that the interest rates offered are likely to be higher in comparison to those on the wider market intended for applicants with a good credit score.

Need more help? Check out our quick help guides:

Very Bad Credit Loans Direct Lenders Considerations

Some lenders may offer a ‘soft search’ which could indicate whether or not a potential applicant would be accepted for a loan. This is a great tool that won’t harm a person’s score when browsing to see what is available, however even if approved via the soft search, there are still a range of factors that should be considered before proceeding as follows:

Affordability and likelihood of defaulting

The applicant should ensure that they can afford the loan repayments before committing to a loan as any defaults would severely impact their bad credit score even further. In addition, as already discussed the interest rates are likely to be high and therefore the overall cost of borrowing will all add up.

Credit limits

Often, lenders willing to offer loans to those with bad credit are already taking risks and therefore may limit the amount of credit limit or loan value offered.

Credit score

As mentioned, a person’s credit score will be a factor as to whether or not a lender will be prepared to offer a loan and the terms of the loan. Any steps that can be taken to improve a credit score ahead of a loan application will improve the chances of being approved and may decrease the interest rate offered.

Very Bad Credit Loans Direct Lenders Summary

In this post, we have discussed what bad credit loans are and the impact that a credit score has on the financial options for a potential applicant. We have also discussed a number of considerations that should be reviewed before proceeding with a loan.

Should you wish to discuss the financial solutions available to you and your personal circumstances, please get in touch with our friendly team.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

What is an SA302 Tax Calculation?

by Dax McLeanPosted on 17th June 2021 | Updated 18th May 2023

If you are self-employed, you may be aware that you will need to prove your income levels during a mortgage application or underwriting process, in order to be approved.

There are a number of ways to do this, however the most common is by requesting an SA302 form.

In this post, we will discuss one method of meeting the lending requirement of proving income.

Why Do I Need to Prove my Income?

The lending rules were tightened up after the UK’s financial crisis in 2008, and lenders need to assess income levels and applicant’s affordability as part of the mortgage application process.

Also, some lenders use multiplying factors in order to calculate how much they are willing to lend a mortgage applicant and therefore without documented proof of a total annual salary, this calculation cannot take place.

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Need more help? Check our quick help guides:

What is an SA302 Form and How do I Get One?

Also known as a tax calculation, this is a formal document created by HMRC that provides an overview of an individual’s tax calculation for one tax year, created from the details provided within a self-assessment tax return.

The summary document includes all taxable income streams and tax liability and is made of two elements documenting both:

A tax calculation for the relevant tax year, summarising the self-assessment including the total declared earnings and tax payable
A tax overview, indicating the status of the tax payments

The summary document is also known as a Tax Calculation Form and is the most sought-after proof of income for a self-employed person, suitable for mortgage applications.

Unfortunately, HMRC no longer issue SA302 forms and therefore in order to obtain a form you would need to either request a copy via the HMRC website or call and request one to be sent in the post.

Bear in mind that if requesting a form to be posted, it can take up to two weeks for this to be received, therefore if you have access to the website it is quicker and easier to print the form yourself, which can be found under within your HRMC online self-assessment account under the section ‘more self-assessment details’.

If you use an accountant, they can also access this area to download a form on your behalf.

Another method that accountants can use to calculate a summary of annual earnings is by producing a summary directly from their commercial software used to perform the self-assessment tax return on your behalf.

Such documents may need to be certified by the accountant in order to be accepted by a lender, therefore it is worth discussing the documentation requirements with the potential lender before submission.

The timing of the request (and mortgage application) will be key as the self-assessment for the relevant tax year must have already been submitted in order to request an SA302 form. The deadlines for self-assessment submissions are as follows:

Paper submissions must be submitted on the 31st October following the end of the previous tax year
Online submissions are due by the 31st January following the end of the previous tax year

In addition, before contacting HMRC it would be worth asking the potential lender (or independent broker if using one), how many years’ worth of proof of income is required for the underwriting process for the specific lender.

HMRC have SA302 forms available on the website 4 years’ worth of forms (if the applicant has been self-employed for the duration and submitted annual self-assessments).

It is also worth noting, that even if you are employed with PAYE income but also have other earnings, an SA302 form may be useful to obtain to demonstrate your total income to a potential lender.

Related guides:

Do I need an SA302 for a Mortgage Application?

As discussed, mortgage lenders require proof of earnings in order to process an applicant’s mortgage application and the most simple way to provide proof of earnings for a self-employed person is via an SA302 form.

Some lenders will require both elements of the Tax Calculation Form for their underwriting purposes whereas others will only require the tax calculation part of the document, therefore it is worth checking before making an application, to avoid any delays during the process.

It is also worth noting that it has been known for lenders not to accept a self-printed SA302 form. HMRC have published a list of lenders that do accept self-printed SA302 documents available to review here.

What Other Ways can I Prove my Income?

Should your SA302 document not be ready due to the timing issues or if the applicant has not been self-employed for the duration of the tax year, another method to prove income may be required.

There are a number of different documents that can be submitted in order to prove income including:

Bank statements
Tax Returns
Letters from employers including offer letters
Payslips
Self Employed accounting documents

How to get your SA302 Tax Calculation Summary

There are strict regulations within the UK that lenders must abide by, including requiring proof of income from mortgage applicants in order to assess their suitability and affordability for the financial product.

In this post, we have discussed the documents that can meet the requirements of proving income, especially for those self-employed.

If you are self-employed, it is highly recommended that you approach a specialised mortgage broker to assist with reviewing your personal circumstances and suitability of financial products ahead of making any applications.

Brokers can search the whole of the mortgage market to find the most appropriate financial product, with the most favourable terms, which can save the applicant money too.

Once ready to make a mortgage application, brokers can review your documentation to ensure that everything is prepared and organised, meeting the requirements of the mortgage lender in order to avoid delays.

As with any financial decision, it highly recommended that independent financial advice is sought before committing, to ensure that all terms are fully understood and that the repayments can be made comfortably.

As with any secured lending, the ultimate consequence of defaulting on the loan could mean that the property is repossessed by the lender.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

What is an SA302? Tax Calculation For Mortgages

Yaz Shaw

by Dax McLeanPosted on 17th June 2021

If you are self-employed, you may be aware that you will need to prove your income levels during a mortgage application or underwriting process, in order to be approved.

There are a number of ways to do this, however the most common is by requesting an SA302 form.

In this post, we will discuss one method of meeting the lending requirement of proving income.

Why Do I Need to Prove my Income?

The lending rules were tightened up after the UK’s financial crisis in 2008, and lenders need to assess income levels and applicant’s affordability as part of the mortgage application process.

Check Today's Best Rates >

Need more help? Check our quick help guides:

What is an SA302 Form and How do I Get One?

The summary document includes all taxable income streams and tax liability and is made of two elements documenting both:

A tax calculation for the relevant tax year, summarising the self-assessment including the total declared earnings and tax payable
A tax overview, indicating the status of the tax payments

The summary document is also known as a Tax Calculation Form and is the most sought-after proof of income for a self-employed person, suitable for mortgage applications.

Unfortunately, HMRC no longer issue SA302 forms and therefore in order to obtain a form you would need to either request a copy via the HMRC website or call and request one to be sent in the post.

If you use an accountant, they can also access this area to download a form on your behalf.

Such documents may need to be certified by the accountant in order to be accepted by a lender, therefore it is worth discussing the documentation requirements with the potential lender before submission.

Paper submissions must be submitted on the 31st October following the end of the previous tax year
Online submissions are due by the 31st January following the end of the previous tax year

HMRC have SA302 forms available on the website 4 years’ worth of forms (if the applicant has been self-employed for the duration and submitted annual self-assessments).

It is also worth noting, that even if you are employed with PAYE income but also have other earnings, an SA302 form may be useful to obtain to demonstrate your total income to a potential lender.

Related guides:

Do I need an SA302 for a Mortgage Application?

What Other Ways can I Prove my Income?

Should your SA302 document not be ready due to the timing issues or if the applicant has not been self-employed for the duration of the tax year, another method to prove income may be required.

There are a number of different documents that can be submitted in order to prove income including:

Bank statements
Tax Returns
Letters from employers including offer letters
Payslips
Self Employed accounting documents

How to get your SA302 Tax Calculation Summary

In this post, we have discussed the documents that can meet the requirements of proving income, especially for those self-employed.

Brokers can search the whole of the mortgage market to find the most appropriate financial product, with the most favourable terms, which can save the applicant money too.

As with any secured lending, the ultimate consequence of defaulting on the loan could mean that the property is repossessed by the lender.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

Income protection for self-employed contractors

by Dax McLeanPosted on 17th June 2021 | Updated 20th January 2023

Self-employment has many attractions including; being the boss, setting your own hours and choosing your clients (in some cases), however when you leave a permanent position, some of the benefits are lost such as sick pay.

In this post, we will explore what income protection for the self-employed is and what to look out for if seeking an income protection policy.

What is Income protection for self-employed contractors?

Income protection is a type of insurance policy that, in the event of a claim would pay a replacement income if the policyholder was unable to work due to injury or illness.

Policies have a term and are usually set up to cover a policyholder until either they retire, they return to work or the term expires, however short-term policies are also available, providing the same cover for a specific period of time, perhaps to align with a contract.

What does Income Protection Cover?

Income protection generally provides a monthly income in the event that the applicant is unable to work due to an accident, illness or injury.

The duration of the cover will depend on the policy, however, there are often waiting periods before an applicant can make a claim – we’ll cover a bit more about these later.

The exact cover level, duration and any waiting periods would be detailed within the policy documentation, and therefore it is always worth checking the terms and conditions of the policy before accepting it.

Some insurance companies tailor their policies and apply restrictions such as refusing to cover certain illnesses should the company uncover anything such as a family history of a certain illness during their underwriting process.

If this is the case, the insurer would provide further details before the policy is put in place. In addition to tailored restrictions, there are often blanket exemptions on such insurance policies such as not covering injury that was self-inflicted.

Again, upon reviewing an insurance offer, it is worth checking the documentation for any exemptions that the insurer has excluded from their policy offer.

However, it is worth noting that income protection policies for self-employed contractors do not cover pay-outs in the event of a redundancy. Should you require redundancy cover, a separate policy will be required, if available.

Do I need Income protection for self-employed contractors?

It is always best to seek independent financial advice in relation to what specific requirements you may have, however as a general rule if you don’t have enough savings to cover the living costs for yourself and any financial dependents for long-term sickness, for example, you may wish to consider purchasing income protection.

How much Income Protection do I need?

The level of income protection required will be a very personal decision depending on:

The applicant’s level of savings
Their personal and family circumstances
The value of monthly outgoings including analysing which costs are essential
Whether the applicant has any other insurance policies in place

Income protection for self-employed contractors considerations

Waiting Period

We briefly touched on waiting periods earlier, however, to expand, a waiting period or deferred period is a duration of time that will need to pass before a policyholder can make a claim on the policy.

Waiting periods vary between 1 day and 12 months, however, the policyholder must be comfortable with the period before taking up the policy as in the event of an accident or injury, the policyholder would need to self-fund the costs of living while not working before the policy cover can be accessed. The waiting period has an impact on the cost of the policy.

Increasing Cover

When reviewing the options of income protection, there are two types of cover to choose from:

Level cover – Providing a flat rate of cover each year during the policy in the event of a claim
OR
Increasing cover – Inflation-linked cover that results in the benefit of the policy increasing by inflation each year

The increasing cover protects against the costs of inflation eating into the policy pay-outs in the event of a claim, however, this option would usually make the policy premiums more expensive.

Waiver of the premium

The option of a waiver enables the premiums to be covered whilst claiming from the policy, in the event of a claim.

How much does Income Protection Cost?

The value of the monthly premiums for an Income protection policy for a self-employed person would vary depending on their personal circumstances and choices of the policy including the applicants:

Age
The current level of health
Occupation
The level of cover required
The deferred period (as mentioned above)

In order to obtain an accurate quote for an Income protection policy, it would be worth liaising with an insurance broker in the first instance, before making an application.

A broker can assist with finding the most cost-effective insurance policy for the applicant’s personal circumstances, as well as advising the trends with specific insurers such as any common exemptions.

Income protection for self-employed contractors alternatives

There are many alternatives available for self-employed contractors should income protection not be required:

Life insurance – A policy that would pay out a cash lump sum in the event of a policy holder’s death.
Critical illness cover – An insurance policy that aims to pay out a cash lump sum should the policyholder be diagnosed with a serious illness. Such policies can aid in covering the mortgage balance or medical expenses in the event of a claim.
Private medical insurance – A policy that provides access to top-rated healthcare at speed rather than waiting for long periods on the NHS. Such policies are favourable so that contractors can return to work quickly following an accident or injury.
Keyman insurance – A policy for business owners that pays out should a key employee pass away.

Income protection for self-employed contractors Summary

In this post, we have explored what income protection is, what the benefits are of the insurance policy and also, the alternatives available.

Should you be interested in finding out more about income protection policies or alternative solutions, please do get in touch with our friendly team who will be able to provide assistance.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

Family Income Benefit Insurance

by Dax McLeanPosted on 17th June 2021 | Updated 20th January 2023

If you have recently started a family, or if your circumstances have changed, you may be starting to consider the position of your finances and replacement income if you were no longer around.

If so, this post will be of some assistance, covering the main considerations in relation to family income benefit insurance.

What is Family Income Benefit Insurance and Who is it Suitable For?

Policies are available for a single policyholder or as a joint family income benefit Insurance.

The aim of the policy is to provide a source of regular monthly income in the event that a policyholder dies.

The payments are tax-free and would be payable by the insurer until the end of the policy term, providing financial support towards the cost of living for example to the surviving family members and/or children.

An advantage of family income benefit insurance is that a monthly income removes the pressure of budgeting compared with alternative types of insurance policies that would pay out a lump sum in the event of the death of a policyholder.

By providing an income of set monthly payments, the policy enables the remaining family capacity to grieve without the worry of budgeting or managing a lump sum payment.

It is worth noting that the term of the policy is an important detail in establishing the value of the policy and whether or not it is suitable for the family, as for example, if there was a claim towards the end of the term, the payments will stop when the policy ends.

Some thought should be given to the term duration, for example, covering a period of time until any children have finished university, to ensure there is sufficient budget to cover as required, or until the surviving partner is due to retire.

Also, in the situation where a claim hasn’t been required during the term, the policy will simply end and will not have any cash value. In addition, it is worth remembering that a family income benefit Insurance policy is not designed to provide lump sums for example to repay the mortgage in the event of premature death, therefore should this be a desired requirement, a further policy would need to be arranged for this.

How does Family Income Benefit Insurance work?

When an applicant goes through the process of obtaining quotes for family income benefit Insurance policies, they can request a certain level of income that would be payable in the event of a claim.

Once the insurer receives the application, they may complete some underwriting checks to assess the risks involved with the application in order to calculate the monthly premiums that would be required for the level of cover requested.

As discussed, such policies have a term applicable and therefore the applicant would need to assess how much income would be most suitable for the family should he or she passes away, and what policy term would be most sensible ahead of making an application.

It is also worth noting that the value of the income benefit can be tailored to the requirements of the policyholders, however, the higher the insured value will increase the monthly cost of the policy.

Consideration will also need to be made for inflation. As the cost of living tends to increase over time, unless an index-linked policy is chosen, the monthly benefit value from the policy, in the event of a claim could decrease in real terms.

Index-linked policies do often come at an increased cost in monthly premiums though, which would need to be factored in if required.

How much does Family Income Benefit Insurance Cost?

As the risks to the insurer are considerably less with a family income benefit Insurance policy than other types of income protection or life cover, due to the spread of payments should a claim be made, rather than a lump sum being payable, often the premiums are more cost-effective for families.

The cost of the premiums for family income benefit insurance policies depends upon the applicant’s requirements and will vary depending on a range of factors of the applicant(s) including:

Age of the applicant(s)
The current health of the applicant(s) upon making an application
Lifestyle habits of the applicant(s)
Income levels of the applicant(s)
Employment status of the applicant(s)
Level of income benefit selected
The term of the policy

What are the Alternatives to Family Income Benefit Insurance?

There is a range of insurance policies available on the market these days as alternatives to family income benefit insurance. A couple of examples are as follows:

Whole Life Insurance

Instead of a specific term covered as we have seen with family income benefit Insurance, a whole life insurance policy would provide cover until the applicant’s death, providing a guaranteed cash lump sum. However, with a whole life policy, the premiums do tend to be higher than a family income benefit.

Term Life Insurance

This insurance policy would provide a lump sum rather than regular monthly income payments however there would be a designated term selected, similar to that seen within the family income benefit insurance and the sum assured becomes payable in the event of death during the plan term.

Family Income Benefit Insurance Summary

In this post, we have discussed family income benefit insurance including who may be most suited to such insurance policies, and alternatives available should this type of insurance not be for you.

Should you be seeking a life insurance type of policy, you may wish to instruct the assistance of an insurance adviser who can provide advice regarding the most suitable policy for your requirements, including reviewing the terms of suggested policies to ensure compatibility for the applicant(s).

In addition, insurance advisers can also help to compare various policies, across a wide range of insurers to find the most competitive premium rates available on the market, and therefore can save the policyholder money too.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

What is a Mortgage Underwriter?

by Dax McLeanPosted on 26th May 2021 | Updated 20th January 2023

Before searching the mortgage market for the right product and submitting your application, it is worth taking the time to understand the mortgage process.

In this post, we will explore the mortgage underwriting process.

What is Mortgage Underwriting?

Underwriting is one of the final elements to be concluded before a mortgage application is approved, and at which point the lender accepts the financial risk of the mortgage agreement.

What is the Mortgage Underwriting Process?

The mortgage underwriting process includes undertaking checks on the applicant(s) credit history and affordability as well as checking the property to be associated with the mortgage. Each lender will also have its own policies regarding underwriting and eligibility criteria that will need to be met, as well as fraud checks.

During the process, an underwriter will perform the checks that ensure the suitability of the mortgage applicant(s) and the property.

The process is undertaken to protect the lender from as many risks as possible, ensuring that only certain applications are approved where all criteria are met.

Each lender will have their own mortgage underwriting process, where some of the checks may be completed electronically and automatically and some checks are a manual process.

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The Process will usually involve the following steps:

Soft Credit Check – This is commonly an electronic, quick process that provides a yes or no answer if the application can be proceeded with. High-level issues are usually flagged within this stage such as bankruptcy.
Score-carding – This step usually takes place following the initial soft credit check and any further data gathering exercises as required by the lender’s criteria. The applicant(s) are usually provided with a score based on the personal information provided within the application including income levels, employment status and debts. This is often a mainly automated process and the applicant(s) would need to pass the minimum score set by the lender in order to proceed with their application. Commonly if successful at the score-carding step, the lender may offer a Mortgage Agreement in Principle.
Property valuation and final underwriting – Lenders will usually require a property valuation to be completed as part of the underwriting process. Once the report from the surveyor has been submitted to the lender, it will be reviewed ensuring that the property’s condition and type meet the lender’s criteria.

In addition, the value of the property will also be reviewed in association with the final, in-depth checks of the applicant(s), the finances and the suitability of the loan to the property.

What are the Mortgage Underwriting Checks?

There are a number of factors that will be assessed as part of the process to ensure that the applicant(s) meet the lender’s borrowing criteria. These include:

Policy Rules – The lender will have a range of policy rules that must be met in order to approve a mortgage application including ratios and calculations on a range of factors such as age, credit history, legal residency status, maximum loan values and loan to value ratios in relation to the property value and the level of deposit that the applicants are putting towards the property.
Credit Reporting – In addition to reviewing the credit score of an applicant, the lender may also apply their own scoring model as well.
Property Checks – As already discussed, a property valuation will be required so that the lender can ensure that the property is suitable for the loan. Certain types of properties are commonly not accepted such as properties that have suffered from subsidence or are made with certain construction materials or methods.
Affordability – This can be a combination of income multiplier calculations to establish the total amount that lenders will offer, as well as affordability assessments that take into account the applicant(s) expenditure and disposable income. The affordability assessments test the applicant(s) ability to absorb interest rate rises for example.
Fraud Checks – There are a number of legal checks that the lender will need to undertake to ensure they are satisfied with the source of the funds of the deposit as well as general fraud checks to ensure the credibility of the applicants.

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How long does the Mortgage Underwriting Process take?

Again, each lender may vary their expected underwriting durations however often decisions are made within around a week. There can be delays should additional information be required or if the underwriting teams have an influx in the volume of applications to assess.

Why would an Underwriter Reject a Mortgage Application?

Unfortunately, mortgage applications can be declined at various points of the underwriting process, for a range of reasons. There are usually two reasons provided:

Something has changed since the application was submitted such as an applicant has been made redundant
OR
The underwriter has discovered something that flags the application as high risk and therefore the lender is not willing to make a mortgage offer. Should an offer already have been made and the underwriter makes this decision, the offer of a mortgage can be withdrawn.

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There is a range of common reasons why mortgage applications are declined by underwriters as follows:

High Levels of debt
Unacceptable Credit Score and Credit History
Affordability concerns due to high monthly expenditure
Mortgage deposit insufficient
Salary or Employment Concerns
Concerns with the Property’s condition, construction or value
Technical Errors or Insufficient Information

What Happens if a Mortgage Application Is Declined?

Should you find yourself in the position of having a mortgage application being declined, the first advice is to try and remain calm and find out why from the lender.

Next, it is highly recommended that expert advice is sought in order to review all of the circumstances involved before the applicant(s) attempts to make any further applications.

What is a Mortgage Underwriter Summary

In this post, we have explored the underwriting process that lenders complete in order to check the suitability of the applicant(s) and the property linked, as part of the mortgage application process.

Should you require further details regarding the process or would like support throughout the process, please check in touch with our expert brokers who can assist with assessing your personal circumstances against the lender’s criteria to protect against declined mortgage applications.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

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Remortgaging with the Same Lender

by Dax McLeanPosted on 26th May 2021 | Updated 20th January 2023

Following the initial mortgage application, the original mortgage terms will come to an end and then commonly homeowners seek to re-mortgage.

The benefits of re-mortgaging can be large savings as well as locking in preferred rates for another set period of time.

When re-mortgaging homeowners can search the wider mortgage market in order to find the best terms, or remain with their current provider, which may not result in the most competitive terms however can save on paperwork and time.

In this post, we will discuss the benefits and downfalls of re-mortgaging with the same lender, as well as cover the common terminology used within the re-mortgaging process and review the process itself of re-mortgaging with the same lender.

What is a Product Transfer?

The term product transfer is commonly used within the mortgage industry when a policyholder switches mortgage product with the same lender.

The terminology ‘remortgaging does not necessarily relate to the current provider, but more the process of switching to a new rate, mortgage term, loan amount or other different feature.

Depending on the current terms of a mortgage, there could be savings to be gained on interest rates by re-mortgaging however, typically other fees are applicable during a re-mortgage, such as valuation fees, arrangement fees and solicitor fees and therefore a full costing of the option should be undertaken before proceeding.

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What are the Benefits of remaining with the Same Lender?

The main benefit of remortgaging with the same lender and simply switching mortgage product is that the process is much easier. Usually, the process involves a conversation regarding the products on offer and their associated rates of interest.

Once the product selection is made, the mortgage will switch over without the requirements of extra checks and some of the fees as incurred with a re-mortgage to a new lender.

Switching lenders requires a new mortgage application to be made, including meeting all of the eligibility criteria and affordability checks, as well as a property valuation and legal representation.

Another benefit of a product transfer is to avoid the common automatic switch to a standard variable interest rate which is likely to cost the homeowner more money in repayments and interest.

What are the Disadvantages of remaining with the Same Lender?

Although it is easier to stay with a current mortgage provider, there may be downsides of doing so as follows:

The wider mortgage market is not approached

It is highly likely that the current lender will only offer a small range of products for a product transfer and therefore to obtain the most competitive mortgage rates and terms, it is often beneficial to search the wider mortgage market in order to compare a range of products.

To put this in context the current lender may offer a handful of product transfer options, whereas if the wider mortgage was reviewed, there could be thousands of products to compare.

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Missed opportunity for a Property Valuation

It is common that when the property is first bought with a mortgage, that a full property valuation is carried out to evaluate both the price and condition of the property for the purposes of the mortgage lender.

The valuation of the property is critical when calculating the loan to value, or LTV ratio for the lender, which often is linked to the interest rate offered on the mortgage.

However, when a product switch takes place without the requirement of a property valuation, any inflation in the property price has not been captured, which can limit the level of borrowing potential available.

It would depend on the homeowner’s circumstances if this is a big deal, although usually if the property price has increased, the loan to value would decrease resulting in preferred interest rates being offered. Not all remortgages arrange a new valuation.

Affordability Improvements not being Captured

Often a couple of years would have passed since either the initial mortgage application or a previous re-mortgage and therefore the homeowner’s personal circumstances may have improved either by promotion at work or reduce expenses such as childcare costs ending, therefore improving the affordability.

Flexible Options

As briefly mentioned, when transferring mortgage product with the same lender, there may be limited mortgage options, whereas if a full market search and new mortgage application was made, there may be more flexible options available such as decreasing mortgage payments to increase the disposable income or, repaying a proportion of the mortgage off without incurring early repayment fees during a mortgage term.

Another option homeowners may wish to consider is borrowing more money during the process of re-mortgaging which wouldn’t usually be possible with a simple product transfer with the same lender although a further advance may be available with the current lender.

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What is the Difference Between Product Transfer and Porting?

The process of porting a mortgage occurs when a homeowner opts to move to a new house but there is the option of transferring the mortgage with the same lender to the new property. Not all lenders allow mortgage porting and therefore to find out more it is worth liaising with your current lender as soon as possible, to clarify if this is an option.

If porting is not an option, a new mortgage application will be required against the new property, incurring the associated fees with a new product as well as any early redemption fees if due.

Porting is therefore differing from a product transfer where the property and lender remain the same.

How long does a Remortgage Process Take with the Same Lender via Product Transfer?

The process of switching mortgage product with the same lender is typically very quick as no third parties are involved to complete extra checks.

Remortgaging with the Same Lender Summary

In this post, we have discussed the process and terminology used when transferring to another mortgage product with the same lender.

We have also explored the pros and cons of staying with the same lender, however, if you have any further questions or would like a full review of your personal circumstances including whether staying with the same mortgage lender is the most competitive option, please do get in touch to book an appointment with one of our team.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

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Mortgages for Doctors – Options for those in the medical profession

by Dax McLeanPosted on 26th May 2021 | Updated 20th January 2023

Certain career paths, such as choosing to become a doctor, whilst ultimately rewarding do also have some complications including lengthily training requirements.

In addition, once working, it is common for training contracts to be in place for many years whilst the continued learning takes place as well as other factors being at play throughout a doctor’s career such as choosing to work as a self-employed locum GP or diversifying into training for example.

In this post, we will explore the complex circumstances that doctors often face when looking to apply for a mortgage, as well as options available to junior doctors in order to take their first step on the property ladder.

Why Do Doctors Face Challenges When Applying for a Mortgage?

There are many factors that can lead to complicated earning projections for doctors over time as their career develops such as:

Pay scales within the NHS – A doctor’s salary may initially be fairly low and therefore affordability criteria may be challenging to meet, however as training and development progress a doctor’s salary should be bolstered, which a mortgage applicant would wish to be noted by the lender.
Multiple, complex incomes – Senior practitioners and consultants may have multiple income streams such as training or lecturing income, awards and income from private practices.
Self-Employment – As discussed it is common for doctors to become self-employed, which can add complications such as proving income as well as burdening additional costs such as insurances.

Therefore for a doctor’s application to be fully assessed for borrowing potential is it highly recommended that they seek the advice of a specialised mortgage broker in order to support initial research, ensuring that lenders are selected to be approached and support throughout an application and compare the best rates and terms for a mortgage.

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How Much Can Doctors Borrow?

Typically, standard mortgage lenders can offer up to 4.5 times the applicant’s income as a total mortgage value, however with some lenders that understand the complexities of a doctor’s earnings, the multiplier may increase to 5 or more times the doctor’s salary.

However, the actual money that can be borrowed will depend on a range of personal circumstances including the amount of deposit that can be offered, the applicant’s credit score and credit history, as well as income levels and current employment status.

What Additional Flexibility Factors do Doctors Need to Consider?

During the early stages of a junior doctor’s career, there are likely to be expectations that as part of the training programme different specialities are covered within various hospitals and therefore doctors often are required to move around while their training commences.

Should a doctor wish to be able to purchase a property while completing work-based training across various hospitals, they may require additional flexibility from their mortgage provider in order to rent out the property whilst undertaking placements.

In this scenario, the lender would need to agree to a consent-to-let in order to rent out the property.

Should the placement become longer-term, or relocation is required, the doctor may be in the position to request that the initial mortgage is converted into a buy-to-let mortgage, to enable a second property to be purchased.

If any of these change in circumstances occur it is highly advisable to discuss the options with both the current mortgage lender, as well as a mortgage broker who can access the whole of the mortgage market in order to find the most competitive deal available.

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What Investment Opportunities do Doctors Have?

Doctors may wish to build a property portfolio for investment purposes, especially as they may know many junior doctors coming requiring accommodation.

Rental income is still a popular avenue to explore these days despite the tax and legislation changes seen within the industry over recent years, commonly providing rental yields of around 4.5% per annum.

Should you wish to explore your options for a buy-to-let property, get in touch with our team who can help provide a range of options, at the most competitive rates.

Other Factors to be Aware Of

In this post, we have discussed the long study durations and dedication it takes to become a doctor, however, the impact of this is often large amounts of student debts.

Although doctors can accumulate large student loans or other debts for the costs of their studies and living costs, it is important to remember that student loans do not impact a credit record or the ability to borrow money. The only element that may form part of a mortgage application and the underwriting process is the affordability checks, and therefore the monthly student loan repayments made once earning over the threshold’s will be taken into account.

For example, should a doctor now earn £100,000 per annum, wishing to borrow between £300,000 and £400,000 towards a property, they could have their potential borrowings reduced due to repayments of student loans.

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Mortgages for Doctors Summary

In this article, we have discussed a range of factors that can impact a doctor’s salary including the expected salary growth, the common income streams that doctors later in the career often diversify to and the likelihood of self-employment within the industry.

Should you be a busy doctor trying to navigate the mortgage market, please get in touch so we can assist you.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

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