What puts mortgage applications outside of ‘standard’ criteria?

What makes a case complex compared to simple?

Let’s start off by explaining what a simple case looks like:

An employed person, who has been working at the same place and in the same role for around 2 years.
Buying in a location near to them, no change in commuting costs and no change in outgoings due to the move.
Standard property in a nice residential area, with no issues that can be picked apart at the survey or legal stage.
No outgoings that are outside of ONS figures and a deposit that shows on their savings statements as a gradual build-up over time, sliced off their income with some good financial stability.
Affordability fits nicely with some surplus and not a single blip on their credit. All debts have been repaid as they should, without any late payments.
Income protection in place where the work sick pay cuts out, some critical illness protection in place to help should they end up with something that stops them in their tracks and a request to discuss their protection needs when they know the new mortgage debt to be covered.

That’s simple, but any other broker worth their salt would check every fact and figure twice just to be sure.

The short story is, this is a lender’s dream and we can almost always get the lowest cost mortgage for them and know full well that should they continue on the path they are on, they will have no trouble with this mortgage for the long term.

Complex Cases

As for complex, well it depends who you go to! A huge % of mortgage brokers, consider self-employment as complex!

As a complex specialist firm, we enjoy a nice simple self-employed case every now and then! We actually take on a lot of these cases, passed over from … brokers… who just can’t get their head around it.

Let’s put some of the quirks under headings for ease:

Property
Any experienced landlord will tell you that a simple 3 bed semi, or 2 up 2 down terraced property will get you a decent yield and a nice smooth profit. But what if it’s a slightly quirky property?

Does it have an annex?
Is it next door to a pub?
A flat above a shop?
Does it have a low EPC?
What about ECO homes?
Escalating ground rents?
Estate Rentcharge?
Ex-MOD property?
Flying freehold?
Low lease years?
Japanese Knotweed?
Leasehold but no separate management company?
Share of freehold?
High Rise?
Ex-local flat with no lift?
Local area mainly investor led?
Aspestos?
The construction?

The list goes on and on…
Or maybe it just needs some work. All of these, and much more, mean that we have to look outside the most standard of lenders. Or at least double-check with them before we apply.

Property location

When it comes to the location, this is actually checked over a bit more in-depth than you would expect. In places like the Channel Islands or the Scottish islands, you can understand the issue that lenders face, but what if you had a flat in Manchester? Did you know it’s more difficult there?

Is there a pub/nightclub/hairdressers/takeaway near your property?
Or maybe the local area shows hardly any owner occupiers.
The location of your property actually has a lot to do with its appeal to lenders and even when a case fits really well, if the valuer flags something up, they may not lend.

Income

If you are not simply PAYE, then you are considered complex. Yes really. There are mortgage companies who do not deal with anything but employed people. As a complex income specialist, I can tell you that I have seen it all!

Not just Land & Property income showing on your tax calculations, but also things like:
Multiple income streams
Foreign income
Benefit income
Contractor income (short term/renewable/fixed term/umbrella/zero hour/bank/CIS/IT/agency/piecework/ probationary/rolling/seasonal/sub-contracted), and more.

Is it complex? Sometimes yes, but when you gain an understanding of how someone works and gets paid, you can then spread it out in order and help a lenders underwriter see and understand.

Savings

A lot of lenders will require you to have a decent amount of savings to cover a few months of voids in income. Without this security, you could end up missing payments and have no fallback should something happen. Less resilient cases are complex, without doubt, it’s not something that should be thrown in with any lender.

Age

Would you believe that most mortgages need to be finished by retirement? Government retirement ages vary from 65 to 69 currently, and that means some lenders will stretch to 68. Over this though, and we would need to look to a less mainstream lender. Why? Because a lot of lenders don’t understand how income from a portfolio would work into retirement.

Some of the lenders who can consider this will then be able to stretch their actual retirement age to 75/80/85 or even indefinitely! These lenders do understand that property doesn’t disappear when you die, but they will have reservations to consider when applying. This extended age criteria would be labelled as

Credit file

It’s not just the odd late payment on a credit card, occasionally we help people who have had a life event that has pretty much destroyed their file and it would take up to 6 years to clear.

We have had instances of domestic violence, fraud, intimidation and other reasons, that some lenders will take a view on should we approach them with the full story.

Usually though, if you have just been a bit lapse with paying your credit commitments, then lower-rate risk-averse lenders will say no, and you will need to consider a specialist lender who will charge extra for the added risk of default.

A good broker will be able to check into your file and find the best lender for you with your specific circumstances, but again, this is seen as complex.

Some companies charge a huge fee for dealing with this, so do your research before you commit to an application. If you are already struggling, why pay a huge fee if you can find a broker who charges the same each time?

Portfolio

When it comes to your portfolio, anything over 3 properties will rule a lot of mainstream lenders out. Should this happen, it is classed as complex. There is a bit of a sliding scale to how lenders view portfolios, with some happy to lend up to 3/5/10 properties. There are some of the more BTL-centric lenders who will allow a much higher number, even unlimited.

There is also something to look out for though, if your portfolio is highly geared, some lenders may stress test this and then find there to be less income via the portfolio than they consider healthy enough to support the mortgages. Not every property should be maxed out if possible, it shows that the equity is available should it be needed.

Work role

Occasionally, your work role could become an issue for some lenders. Let’s talk residential for a moment. Part of the underwriting process is to validate your income. Now if you are on zero hours, or a short-term contract, lenders can be extremely wary of this.

There is also the job type, for instance, if you are in front of the camera in your own house, streaming content, then you may have trouble with lenders not wanting to be part of this. It happened just after COVID-19, when this had become much more common, lenders were very wary and some people did have trouble.

Our speciality is with people in the creative industry, people who have variable, intermittent income with many different streams. Approaching lenders with the figures alone is a good way to get declined again and again. Anyone with variable income needs to work with a lender that understands not only self-employment but also things like LTD Director/contract/umbrella/agency/locum and more.

Then, of course, comes plausibility. Are you a groundworker? Could you really keep that style of work up until you are 70? Not likely. But if you had the future plan to start a small company that you could step back from and employ younger workers, why wouldn’t you be able to pay a mortgage to 70 and more? All of this will need to be discussed with your broker.

Convictions

This one does seem a bit obvious, but it’s worth mentioning too.

Should you have a conviction, you will have trouble. If you try to use the lender’s online systems, they will ask quite plainly ‘Do you have any convictions?’. If you say yes, it’s likely that it would be declined before you start. If you say no, then a credit search or further underwriting will uncover it. That said, should you be using a broker as they will be able to talk to the lenders and see who would be able to make an exception.

If the conviction is not serious, then you would be able to access mainstream lenders with a little bit of research on their part.

All in all, there are many aspects to mortgages and lending that takes cases from standard to complex, and without the support of a mortgage broker/Adviser who can work with complex cases, you may either have trouble, get in trouble or end up going elsewhere.

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