I agree that Self-Cert mortgages don’t have a place with respect to self-employed Freelance Contractors. Or should I say those freelance contractors that are able to produce the following documentation:
- Contract stating hourly/daily rate along with a CV
- 2-3 years certified accounts
- 1-2 years accounts accompanied with 6-months personal and company bank statements
Let’s now dissect the words Freelance Contractor, to Freelancers and Contractors. We often put these people in the same group or category because of the difficulty in defining their roles. Generally, a contractor is someone that has a 6-12 month contract, working on a daily or hourly rate. In contrast, a freelancer would be someone working on shorter-term contracts, typically 1-3 months, or on assignment, project etc. For example, a photographer’s income is mainly based on variable or non-regular earnings. In these difficult financial times, their income is even more erratic. There are, therefore, certain situations where killing self-cert should not be applicable.
I can see why the FSA wants to act, because there has been abuse of self-cert and fast-track mortgages. However as long as some new controls on these products were introduced, there should really still be some flexibility for the individuals they were designed for, but the FSA has decided otherwise. As for people already with self-cert mortgages, the FSA’s proposals will, in many cases, cause financial hardship by stopping them from moving to other lenders to obtain better deals.
I agree that a small number of “contractor specialist mortgage brokers” like ourselves have arrangements in place with lenders that allow us to obtain mortgages based on a multiple of your contract rate. But that’s only because the lenders have the discretion to modify their lending criteria with respect to what qualifies as relevant earnings for lending purposes. As long as lenders continue to have that discretion the “contract based mortgage underwriting” that we have negotiated will thankfully still remain intact.