Mortgage Finance from Eastern Europe is causing concerns

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Mortgage Finance from Eastern Europe is causing concerns Mortgage Guardian

Mortgage Finance from Eastern Europe is causing concerns

I recently came across some information on the revival of self-certification mortgages in the United Kingdom. A company based in Prague, Czech Republic who provides self-certification mortgages to UK borrowers received 7,500 UK applications, some of whom may actually unknowingly qualify for a mortgage within the UK.

Mortgage Finance from Eastern Europe is causing concerns Mortgage launched a range of self-certification mortgage products in January 2016 aiming to circumvent current UK mortgage regulation by offering property finance from outside of the country.

At the time of writing, the firm had been inundated with new applications and they had to suspend their service until new funds were available.

Under the Mortgage Market Review the UK saw the demise of self-certification mortgages as new rules require affordability to be assessed when taking out a mortgage. Self-Certification mortgages became synonymous with the self-employed who are often unable to prove their income in the early years of their business.

We are concerned that some people are self-certifying their income to get mortgage finance overseas when there could be a safer alternative in their own home country.

We reviewed the case studies on the website for the Prague based company and some of the applicants may well have qualified for a mortgage in the UK without the need to self-certify their income”. To answer one case study, working as contractor or being self-employed does not always mean it is impossible to get a mortgage. There are some mortgage lenders who will consider 1 year’s accounts from the self-employed for instance rather than the 3 years that most people think that they need.

Some other case study on the website details one applicant who could probably obtain a mortgage if the purchase price was reduced by £13,000 which seems more than achievable in current market conditions. This could be worthwhile as the borrower would have the protection offered by city regulator, the Financial Conduct Authority. The Financial Conduct Authority work to protect consumers from the harm that can be caused by bad conduct within the UK’s financial industry.

Another case study details a contract worker who used to work as an employee with a company for six years before being forced to become a contractor with the same firm. There are lenders who will lend to contractors who have a track record of working in the same industry and an even better scenario is to contract for a company the applicant used to work for. Whether employed or self-employed, income has to be proven and a self-certification mortgage is not a tool for self-certifying a high income whilst declaring a low income to HMRC. It is a simple case of having your cake and eat it can be dangerous.

Out of the 7500 applicants to the Prague based company, they announced that they only had funding for 200 to 300 mortgages. That is 200 to 300 people not protected by the regulator and unable to go to the financial ombudsman if they have reason to be unhappy during the term of their mortgage. Considering that mortgages can run on average for 20 to 30 years, it is a long time to go without consumer protection.

Our advice to the remaining 7300 applicants would be to find a mortgage broker who specialises in mortgages for your circumstances. If you are a contractor or are self-employed, there are specialist mortgage advisers in the UK that specialise in this area and have a deeper knowledge of mortgages for the self-employed. If you are retired equity release could be a safer route to getting finance than seeking unregulated finance from Eastern Europe.

The United Kingdom will vote on whether to remain in the EU on Thursday 23 June 2016 which is a further insecurity when taking out property finance from abroad, as taxes and interest rates could raise for British borrowers.

Mortgage Guardian is an online mortgage introducer service for people seeking specialist mortgage advice.

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