Credit problems can impact a successful mortgage application and may hinder your chances at some point down the line but Sally and Peter’s situation got slightly more complex when Peter decided to go down a new career path in order to pursue his hobby as a writer.
In this case study, we discuss the importance of taking Mortgage Advice in Derby as early as possible to get you ahead of the game when it comes to your application.
Peter had moments of confliction due to not liking his job, but the salary was adequate enough for him to not want to take the leap and quit.
He started writing more frequently on a weekend, enough to see it as a viable career in itself. He decided for a better work/life balance, self-employment was the way forward, and so he decided to look into self employment mortgages in Derby.
With the additional hours, he could now put to use to develop his own start-up business, this made sure that Peter was seeing profit and after the first year of trading, it was profitable enough for him to consider purchasing a property for himself, Sally and their children so they could invest in a family home instead of renting.
Unfortunately, Peter’s younger years caught up with him and some faults were highlighted on his credit record. Although he had improved his credit score over the past few years, the old defaults were becoming an obstacle.
This brought forward two issues at hand when the customers sought a Mortgage Broker in Derby such as ourselves for Mortgage Advice.
These consisted of finding a lender who would be more lenient than others with past poor credit, whilst also finding the same lender who would allow lending based on the years’ trading figures.
Peter realised that his application would not be easy from the get go and took the sensible approach of seeking mortgage advice in Derby with us early on in the process, even as early as seeking mortgage advice before viewing properties.
Instantly whilst looking over Peter’s Experian report, it was clear to us that a specialist lender would need to be approached. On the upside, his small business didn’t require too much investing financially and he was able to quickly save up a 15% deposit over time with a portion of the savings coming from the ‘bank of Mum and Dad’.
Some lenders who put themselves under ‘specialist’ have made a niche for themselves when it comes to lending and customers who haven’t been Self Employed in Derby for a long period of time.
There is sometimes quite a risk for these lenders as some businesses go bust quite soon after they start out. In order to protect themselves from this, they prefer customers to put down a 15% deposit which successfully helped Peter’s application early on.
From this, we were able to obtain a mortgage agreement in principle and Peter and Sally went on to purchase a family home.
A downside with specialist lending is because they are working with niche customers, they do tend to charge higher rates of interest than you might see within establishments such as high street banks.
Just because these rates are higher in no means does it mean extortionate, overall in many cases, it is still cheaper than renting.
If you go with a specialist lender for your first mortgage, this does not mean that you are frozen out of other competitive mortgage rates in the future.
While it’s likely that you’ll have to sign in for at least two years, if you can prove a good payment history, then a remortgage to a more well-known lender offering a better deal after a while should be achievable.
It’s likely you may have to sign in for at least two years, but if you’re able to prove a good payment history, then a remortgage to a different lender, who is offering a more suited deal for you, should be achievable later on down the line.
This doesn’t faze specialist lenders as they expect that this is what may happen when they take some cases on. These lenders perceive themselves as ‘stepping stones’ and when you move to a different lender, they tend to lend the funds that have been repaid and seek to lend it back out to future customers.
Overall, a vital part is played in the mortgage market by specialist lenders as they help customers that a lot of banks usually will not. However, this does not mean that they will lend to just anyone, as you will have to be able to fit their criteria.
Date Last Edited - 28/04/2020