Self Cert Mortgage Cull means regular bookkeeping is imperative for the self employed
Self certification mortgages look like they are about to fizzle out as anxious lenders decide borrowers without a robust proof of income are not worth the risk.
A self certification mortgage involves borrowers vouching for themselves that they can afford the repayments, sidestepping the need to prove their earnings; a popular option amongst the self employed where their income may be unreliable or irregular.
Now however, it seems that self employed workers must have proper sets of accounts in readiness if they want to get a mortgage which means regular bookkeeping will become vital.
Because previous borrowers inflated their income so that they could secure larger loans, lenders are now nervous that the self certification customers will struggle to meet their repayments in this poor economic climate, mainly because their income projections were based on normal business conditions, and these conditions are obviously now far from normal.
To add to the predicament faced by self employed business owners, the Financial Times has claimed that the majority of lenders are now basing their calculations on the lowest total of three years’ accounts where previously they would work on the highest total.
The answer? Lynn Watson says it is regular bookkeeping and explains: ‘As well as being able to support any credit or mortgage applications, the benefit of regular bookkeeping and having proper accounts prepared will help business owners monitor trends including things like changes in turnover, time taken by customers to pay and rising costs of materials. Armed with this sort of information, the self employed business owner will be better able to predict the ease at which they can pay off the mortgage or loan, and will be able to decide whether it is worth the risk in the first place.’
For more information on the bookkeeping services offered by Office Assistants please contact us.
