The trouble with specialist mortgages is that they are not easy to define.
We all love a mental shortcut. Just think about the Spice Girls. They were successful because you could label them with five words: Ginger, Sporty, Scary, Baby, Posh.
Easy to categorise. Easy to remember. And easily the most successful British girl group of all time.
But the whole point about specialist mortgages is that they are not straight-forward. These are the cases that cannot be readily categorised – if they were, then they would probably pass an automated credit score.
They require an individual approach because the circumstances tend to be unique. The trick for brokers is to have a clear idea of the types of circumstances that broadly fit in the specialist bucket rather than the mainstream.
These tend to fit into two broad categories – complex income or historic credit problems. Many brokers will rightly point out that the high street will consider different types of income or look at applicants with some form of adverse credit. And a sophisticated automated system may be able accept some form of complexity depending on the lender’s appetite at the time.
But if the complexity isn’t particularly straight forward, or it comes with other complexities then this is where even a generous credit score can fall down.
And even these broad categories cannot be easily aligned to a particular type of customer. Think about complex income and what do you think about? Self-employed plumber? IT contractor? Mortgage broker on performance related remuneration? Freelance journalist? City worker with a colossal bonus?
There are so many reasons why someone’s income may be variable or from different sources that it is impossible to define a ‘complex income’ client as soon as they walk through your door.
Three examples of complex income mortgages we have recently agreed are:
1. A separated warehouse operator earning low basic income but significant bonus payments.
2. A teacher with a track record of supplementing income by carrying out additional marking work.
3. An engineer in the army with three sources of income, including army income, private pension and War Disablement Pension.
It’s difficult to identify a single common thread with these applicants, until you start to dig into the detail. And this detail is where you will find the specialist customers – the clients to whom you can really add value, by providing them with a solution they may not find direct on the high street.
One area of complex income where we have identified the value of the detail is in mortgages for customers who earn income for foster care. There are 58,000 foster carers in the UK, looking after the 63,000 children who are in foster care, according to The Fostering Network. And a carer could be paid more than £200 a week to help support a child in their care. Yet, while affordability assessments will consider the cost of dependents, few lenders will actually look at the income that is provided to foster carers to cover these costs.
It’s perhaps not as glamorous as a City worker’s bonus, but foster care is an important element of complex income for a large number of people who rely on the stability of owning their own home.
Unfortunately specialist mortgages aren’t easy to define. But take the time to understand the detail and this sector can prove very rewarding for you and your clients.