FSA mortgage rules a problem for the self-employed

Self employed need to prove their income to get a mortgage

The Financial Services Authority (FSA) recently published a new set of rules for the mortgage market which could have a major impact on the self-employed.

Self employed workers will find it more difficult to get a mortgageThe new rules have been devised, following a 3 year consultation, to “put common sense at the heart of the mortgage market”. The intention is to try and prevent a return to the risky lending that took place before the economic downturn, which resulted in many borrowers being able to pay and even more trapped with negative equity in their homes.

Lenders will have a greater obligation to assess borrowers’ ability to pay the loan and to verify their income.  This effectively means the official end to “self certification” mortgages (often called “liar loans”), which were particularly popular with the self-employed.

What it means now is that self-employed borrowers will have to provide audited accounts for two to three years trading to prove their income.  A very small number of lenders may accept one year of accounts plus detailed future projections, although the deposit required is likely to be at 20% of the mortgage value.

Whilst it is the role of the financial sector to provide specific advice on choosing mortgages, Lewis Smith & Co can help with professional preparation of your accounts.  That way you can be sure of setting out your case as effectively as possible.

For more information contact Andrew Smith or Craig Beale on 01384 235549 or email info@lewissmith.com.

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