Status Vs Non-Status Lenders

28/10/2020

In the mortgage and property loan industry, a “non-status lender” refers to a type of lender that doesn’t necessarily need to see the applicant’s credit score or income in order to approve their loan. This differs from a status lender, who will need to see proof of both the applicant’s credit history and income in order to consider an application.

The main difference between a status and a non-status lender is how they evaluate loan applications, more specifically the details they base their decision off of. With status lenders, this will typically involve checks on the credit history and income of the applicant. For non-status lenders, this will be focused more so on the property’s value and what the applicant plans to do with the loan, with the lender looking at various other influencing factors.

Important to bear in mind is that status lenders will be more tightly regulated by the Financial Conduct Authority (FCA) and will therefore, more often than not be able to lend a higher loan-to-value (LTV). In the case of non-status mortgages, lenders will typically lend a lower LTV, due to the potentially increased risk.

What Is a Non-Status Mortgage and How Does It Work?

A non-status mortgage, also known as ‘self-cert’ or ‘self-status,’ is the type of mortgage offered by non-status lenders. With a non-status lender, the applicant will not usually have to provide proof of their credit score or income when applying for a mortgage. The lender will instead look at other details of the applicant when evaluating whether or not to lend to them, such as the value of the property.

With non-status mortgages, borrowers can expect a maximum LTV of around 70 to 75%. As is the same with status lenders, the mortgage will be secured against the property, which will act as a form of security or ‘collateral’ for the loan. This means that the property is used if the borrower does not keep up with their mortgage repayments and can be repossessed by the lender.

Should You Consider a Non-Status Mortgage?

Non-status lenders are typically considered by those who struggle to provide proof of a stable, regular income that is required by other, regulated lenders. This usually includes self-employed people and contractors who will have a potentially fluctuating income over the course of their professional careers. There are a number of different working situations that may make it difficult to provide adequate proof of income for the more traditional lenders, including:

  • Those who don’t have set working wages and salaries (such as freelancers)
  • Those who work off of commissions (often people working in sales)
  • Those who get significantly large sums of money in bonuses (including the likes of recruiters, bankers and other financial professionals)

Although opting for non-status lenders over more regulated lenders may be appealing from the outset, it is important to understand the risks and potential implications on these loans before applying. Whether you apply for the mortgage through a broker or directly through the lender, you will still be required to provide evidence of affordability and other relevant documentation to satisfy the lender.

Which Type of Mortgage Lender Is Right for You?

You should always look to choose a lender that is as accommodating to your personal circumstances as possible, otherwise you may struggle to get your application approved.

While those who struggle to prove their income is stable enough with traditional status lenders may find it tempting to opt for non-status alternatives, there are various factors that come into play with this type of mortgage which may not be suitable for you. Those considering non-status lenders must be aware of the increased risks this could bring, as such lenders not being regulated by the FCA.

Why Are Lenders Non-Status?

From the lender’s perspective there are a few reasons why they may opt to be a non-status, rather than a regulated status mortgage lender in the UK. Allowing applications to be made that do not then incur credit and affordability checks in the same way as a typically regulated lender, means the process can be a lot quicker for both borrower and lender. Furthermore, the process can also become quite a bit cheaper, with the lender not having to pay for and then wait for the results of any affordability and credit checks.

Also, as a non-status lender, not requiring credit and affordability checks as part of the underwriting process, the period of time from application to acceptance to funding can be made a lot quicker. This is therefore, of benefit not only to people who can’t get a mortgage due to their employment status and payment terms, but also to those that need speedy funding for the mortgage in question.

As recommended by the FCA however, you should always speak to a regulated mortgage advisor to seek advice on mortgages of this nature

As a mortgage is secured against your home, your home could be repossessed if you do not keep up the mortgage repayments. Think carefully before securing other debts against your home.

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