Paul Hunt is head of marketing at Platform
“This is a very common issue for self-employed persons, as often the net profit shown on their accounts does not accurately reflect the actual income they earn. This is where self-certification is invaluable, as it enables people like Mr Oder to take out a mortgage, which they can realistically afford.
Platform has a number of self-certification options and currently has the choice of one, two and three-year Base Rate trackers, plus two and three-year fixed rates, all available up to 90 per cent loan to value (LTV). All our self-certification mortgage products have no early repayment charge (ERC) overhang and no higher lending charge (HLC). Plus, they are available to the self-employed and employed (employed up to 85 per cent LTV).
It appears likely that Mr Oder would self-certify £45,000 as his income and so this would entitle him to a maximum mortgage of £157,500 (based on Platform’s income multiple of 3.5). However, Mr Oder wishes to raise some extra capital and some of this will be used to purchase computer equipment for his business. Many mortgage lenders would not accept this, but Platform allows unlimited capital raising for any purpose up to the scheme maximum LTV limits. Therefore, Mr Oder could apply for a mortgage of £157,500 and so raise an extra £17,500.”
Tony Catt is director of Tony Catt IFA
“Mr Oder has various options available to him. He can probably re-mortgage up to 85 per cent loan-to-value (LTV) of his property, although some lenders may go to 90 per cent LTV for self-certifying borrowers. At £185,000, this would give him borrowing of £157,250 and therefore provide £17,250 for his home improvements and purchase of computer equipment. His income should cover this level of borrowing since 3.5 times income is within criteria for many lenders, even for self-certification. This would probably be the cheapest borrowing on a month-to-month basis because all of the borrowing would be at mortgage rate.
While the home improvements would be a recommended use for mortgage-based, long-term funding, some lenders may frown upon the purchase of the computer equipment for business purposes. This should ideally be undertaken with shorter-term finance. This may be in the form of a further advance, which would be secured, or simply a personal loan or even business finance from his bank. This would make the claiming of interest on his borrowing as a taxable expense much easier as it would be more clearly identifiable.
His choice of financing will depend upon how much he can afford to pay on a monthly basis, his credit status as well as his overall financial position.”
Jason Richardson is an IFA at Yoo Too Financial Services Ltd
“Mr Oder would be best advised to apply for a self-certification mortgage. He would have two options available to him, depending on the amount of funds he would like to release from his property for the home improvements and computer equipment.
He could remortgage up to a maximum of 85 per cent of the value of the property, to release £17,250. This could be achieved on a rate such as that offered by the Coventry Building Society at 5.25 per cent. This is a flexible rate for the term of the mortgage. The product offers a free valuation of the property and free legal fees (on using the lenders conveyancer). There is a booking fee of £199 payable on application, and an arrangement fee of £350, which is added onto the mortgage at completion. There are no major redemptions penalties at all on this mortgage, only a ‘sealing fee’ of £195 should the account be closed. It offers flexibility with interest charged daily and no restrictions on monthly overpayments or lump-sum payments. Payment breaks of up to three-months each year (during which interest continues to accrue) are also allowed.
Alternatively he could remortgage up to a maximum of 90 per cent of the value of the property and thus release £26,500. This could be achieved on Bristol & West’s product at 5.49 per cent. This is a discounted rate at 1.10 per cent off the standard variable until July 2009, after which the rate reverts back to the bank’s SVR. There are redemption penalties of 3 per cent of the loan amount until July 2009, but after this he would only have to pay the basic ‘sealing fee’ of £195 to change to close the account.”
