Not all mortgages are straightforward. There are several potential pitfalls when applying for a mortgage under normal circumstances, but what if your circumstances aren’t normal? What if you need a specialist mortgage?
Does the mortgage market cater to those who need a less conventional mortgage?
This article specifically focuses on those niche areas of mortgage lending and looks at when you might need a specialist mortgage, the type of areas specialist mortgages cover and where you can find the best lenders.
What are specialist mortgages?
If you were to walk into a high street lender to apply for a mortgage today, they’d assess you based on:
- Deposit amount
- Credit rating
- Financial outgoings
- Property type
But what happens if you don’t fit into the box they require?
Applying for a mortgage isn’t always straightforward, everyone’s circumstances are unique. Conventional lenders are geared towards strict lending criteria including affordability tests. There is often no room for bespoke judgements that are required for a potential homeowner.
But what is a specialist mortgage?
It’s a type of mortgage that caters to those who need something more than what the high-street lenders can offer, where decisions are made on individual merit. It could be that you’re self-employed, have bad credit or need a commercial mortgage; for all of these circumstances you would most likely need to seek a specialist lender.
For all of these, the application process for a mortgage is less straightforward and requires a little more understanding and flexibility than usual mortgage lenders can give.
In reality, a specialist mortgage is nothing more than a slightly more complicated mortgage than usual.
Common reasons you might need a specialist mortgage
There is no common characteristic that binds each specialist borrower together because there are so many different reasons you may need a specialist mortgage.
So why might you need a specialist mortgage?
- You have a poor/adverse credit history
- You declared bankruptcy in the past
- You’re looking to make an offer on an unconventional property
- You need bridging finance
- You need a second charge mortgage
- You’re an older borrower
- Your self-employed/contractor
- You’re planning a self-build
To be honest, the list could go on, and the thing is you might not have even thought that some of these would require a specialist lender.
What are the red flags for a mortgage lender?
Again, if you were to walk into a high street lender today and apply for a mortgage what do you think the outcome would be? Are you aware of some of the red flags your application throw up?
Applying for a mortgage gives your potential lender approval to look at your credit history and score.
If you’ve faced credit issues in the past:
- Missed or late mortgage payments
- Debt management plan
- Debt relief Order
- A high amount of unpaid debt
- Payday loans
When bad credit is a factor, lenders will also determine your eligibility based on the severity of the issue and the date the issue was registered.
There are still specialist lenders who will consider your application with a more severe issue. Their decision will mostly come down to how historical the adverse is.
Fluctuations in your income
As a doctor, a contractor or even if you’re self-employed, there can/may be fluctuations in your income. This can raise red flags to lenders who may be concerned about whether you can afford your mortgage repayments every month.
It may also be the case if you work for commissions or bonuses.
You’ll need to approach a flexible lender who will view your income with the bigger picture in mind, taking other financial information into account.
Buying a non-standard home
Wanting to make an offer on a unique property? Many conventional lenders see any property that deviates from the usual brick or stone walls, concrete foundations and a tiled roof, as ‘non-standard’ and will consider it to be a higher risk to lend on.
Unconventional properties could be considered as:
- Homes with thatched roofs
- Concrete homes
- Prefabricated buildings (prefabs)
- Steel frame properties
- Timber frame properties
- Listed buildings
- Homes made with unusual materials like cob, wattle and daub or straw bale
- Single brick skin
- Unique conversions i.e. a church, chapel, or a barn
- Flat-roofed properties
Taking a new mortgage out at an older age can be a red flag to some lenders. This is only because lenders expect that your income will fall in retirement.
However, there are plenty of lenders out there if you look at the wider mortgage market, who work with those who are older and looking to secure a mortgage.
What areas do specialist mortgage lenders cover?
Everyone is different, not one of us is the same and that means our circumstances are individual to us. Specialist mortgages cover just that, but, there are some fairly common lending needs that specialist lenders cover such as:
Bad Credit Specialists
Poor credit history can absolutely affect a mortgage application. However, going out and making several applications across a variety of lenders is not going to work in your favour.
There are bad credit mortgage specialists out there such as Aldermore, Bluestone and Accord Mortgages, who specifically lend to those with a bad credit file. Speaking to one of these specialists they can assess the reasons for your current record and identify lenders who are best equipped to deal with your application.
Being self-employed can provide a barrier to some lenders where you don’t fit in their box. This is why you need expertise directed towards assessing the merits of your business. By looking at your accounts to assess your income and profits, as well as any potential income projections specialist lenders, will decide on a case-by-case basis.
Providing information and proof of your income is the biggest and most important difference in getting a mortgage as a freelancer or self-employed individual. It can also be the biggest concern when looking to get a mortgage.
Charging daily or weekly for your work as a contractor?
Many mortgage lenders aren’t willing to deal with applicants that are contractors because they don’t fit into the neat little box that full-time applicants do.
It can make it difficult for some lenders to assess your income accurately. However, speaking to a specialist in contractor mortgages who will delve deeper into your income records can mean a more positive and favourable outcome.
Contractor-friendly banks that would be happy to take on your application are usually Halifax, Leeds Building Society and Kensington.
Buy-to-let mortgages are different from conventional mortgages and as such are assessed differently. Applications will be more geared toward the expected rental income you’ll generate and how you intend to repay the mortgage – remember buy-to-let mortgages are a business investment.
Lenders will scrutinise the viability of your application, which is why having a specialist in buy-to-let mortgages will help you put together your application before presenting it to lenders so you have a higher chance of success.
Shared Ownership Specialists
Need to find a specialist in shared ownership properties, or considering shared ownership?
Shared ownership allows you to buy a portion of the property and rent the other, making them a less conventional type of mortgage. Specialists in this field can help you find the right lender for you and for a shared ownership mortgage.
Help to Buy Specialists
The mortgage process can be a daunting process full of hurdles you may not have considered.
Being a first-time buyer and looking to utilise the help-to-buy scheme to get onto the property ladder, a help-to-buy specialist can assist you through the mortgage process and help you find the right lender and scheme that suits your circumstances.
Commercial Property Specialists
Looking to buy a commercial property?
Specialist financial lenders have a different approach to mortgages and will have dealt with similar applicants, like yourself, in the past. As there are so many variations on commercial property, applications will be assessed on a case-by-case basis depending on lender criteria. It will also mean that rates will vary depending on the level of risk the investment poses to the lender.
These are just a small portion of common specialist areas, the list could be endless and includes other situations such as:
Where can I find a specialist mortgage broker?
Arranging a mortgage is never a simple or straightforward process especially if your circumstances are a little more complex.
Looking to the wider market could open a few more doors for you. Speaking with a specialist advisor who has access to whole of market lenders can put you in the best possible position for a specialist mortgage. Based on your or your business’s circumstances they’ll know which lenders you should approach and who are the best equipped for your circumstances.
Furthermore, an advisor can help you prepare an application as they’ll know what the lender requires from you to assess and process your application.
Contact us at The Online Mortgage Guru on 0345 3669799 or email us via firstname.lastname@example.org and we will put you in touch with a suitable specialist to handle your enquiry who has experience handling cases such as yours.