| Before
the credit crisis, secured loan, remortgages and mortgages were
as available to the self employed as to the employed.
The fact
was, that in some cases, as regards, for example, income requirements,
the self employed were at an advantage, and in other aspects
they were equal to those in employment.
There
are a number of factors that lenders take into account when
granting home loans, and the first of these is the equity
available in a property.
The most
important feture in remortgages, mortgages and homeowner loans
is equity, as they are all types of secured homeowner loans.
Those
with more equity can obtain a better rate of interest.
Before
the recession, employed applicants could obtain secured loans,
mortgages and remortgages at up to 125% of equity, meaning
that these financial products were available at 25% more than
the value of the property.
This 125%
equity plan was only available to employed applicants, but
none the less, the self employed were also well catered for
as they could obtain a secured loan, a mortgage or a remortgage
at up to 100% LTV.
This did
not place them in too much of an inferior position as regards
equity.
The second
most important determining factor in being accepted for any
of these three home loans, is the status of the applicant,
with high credit scoring applicants being in a position to
obtain a lower rate of interest than those with a poor credit
rating.
The same
credit profile was accepted for both people in employment
and those who were self employed.
The third
important feature for obtaining homeowner loans, remortgages
and mortgages is the income requirements, and in this the
self employed used to have the edge.
This advantage
of the self employed over the employed was due to the fact
that lenders take a certain percentage of income when considering
applications , and prior to the credit crunch the self employed
could self cert their own income.
A self
certification is the declaring of income without providing
accounts, an accountant's reference or any other type of official
proof.
Some self
certs were inflated, with the borrower overstating their net
profit, to make certain that their income would lead to approval
for self employed loans, remortgages, etc.
The employed
on the other hand, could not do this, and had to provide wage
slips showing their actual salary.
This meant
that the self employed often had the edge over the employed
as regards income when applying for any home loan, while at
the same time being equal as regards status, and did not rank
far behind as regards equity.
The recession
however changed this situation enormously, leaving many working
for themselves unable to obtain any kind of finance.
|
