- Fantastic news this week in that the Skipton Building Society have come back to the mortgage market with a new range of products. They are offering a range of 2 and 3 year fixed and tracker deals with competitive fees for both purchase and remortgage. They are also offering a couple of exclusive products at 90% loan to value which will bring some much needed competition to this end of the market.
- The FSA has announced today in a consultation paper that they are going to stop lenders from offering ‘Self-Certification’ and ‘Fast Track’ mortgages to both employed and self-employed mortgage applicants. What does this mean, that going forward everyone will have to provide evidence of income from employer, bank, accountant or HMRC. As usual this is the FSA with their finger on the pulse of the mortgage industry. As any Mortgage Broker will tell you ‘Self Certification’ mortgages have not been available for the last 12 months, a classic example of the mortgage market regulating itself in spite of the regulator.
- With the end of ‘Self Certification’ mortgages the question is now open to Accountants what stance will you take for clients? Help them pay as little tax as possible so lowering their Net Profit or pay more tax have a higher Net Profit and be able to afford that next house purchase or remortgage?
The end of self certification mortgages will clearly be bad news for individuals who have prepared their own Tax Returns and Accounts in the past, as now they may need to seek an independent review of those accounts before they can complete a new mortgage application. This will involve fees and could potentially highlight errors and discrepancies.
For individuals who already employ the services of a professional accountant the process should remain relatively simple. Your existing accountant will be able to verify the figures reported on your Tax Return and within your Accounts relatively easily and often will not charge for this. It is after all just confirmation of work already done.
The age old issue of low profit for tax and high profit for lending remains as relevant today as it ever has done. However, your accounts profit and your tax adjusted profit can often be quite different with good advice. For example, high claims for capital allowances for tax purposes against several years of depreciation for accounts purposes is just one simple difference that can achieve the best of both worlds.
The quality of good projected figures will also now come into play much more where historical profits have been low, particulary in recent years with the impact of the recession.
We are meeting with clients who have had a bad period of profitability and therefore might struggle with a new mortgage application. However, with the future looking much better for many businesses projected figures signed off by a professional accountant can really help to demonstrate an ability to repay a new mortgage commitment.
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Mortgages, in general, are secured debt. They are secured by the property that you bought with the home loan. It’s not standard to have any further rights in a mortgage than foreclosure (it can happen, though). About the only way they can come after you is if they can prove that you were trying to cheat them when you got that mortgage loan (fraud). If you let the house go to foreclosure, your credit is going to be absolutely trashed for a number of years. You might want to see if you can negotiate a short sale on that home (with that lender). A short sale won’t trash your credit like the foreclosure would.