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Halifax Lending To Contractors - An Anecdote


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Mods feel free to move to the Anecdotals section - but I thought it worthy of the main forum for a while.

Speaking to a work colleague this week. Bought a place 3 years ago. Also owns a previous place they rent out as an 'investment'. Not a huge amount of equity in it though.

Saw a place they really liked on a Monday 3 years ago. Called up their bank - Halifax - first thing Monday morning to ask about potential for mortgage for it. Wasn't expecting anything. Only had Ltd company for contracting set up for less than a year. Didnt even have one full year of accounts.

Bloke told her no problem. Go on and put an offer in on the place. He actually advised her to do that straight away. We just need a copy of your contract with daily rate on it and - wait for it - this is no joke - a copy of your CV.

They sent copies over to the Halifax - and had an agreement in principle by noon that same day. Put an offer in on the place - and mortgage fully agreed by the Wednesday.

A copy of your CV. A copy of your CV. A copy of your CV.

Now whether this was standard Halifax practice or a lone shark at it - who knows - it does however point pretty clearly to one of the reasons this bubble has started to froth over again in the last few years.

Even knowing how dodgy the mortgage industry in general can be - I was still pretty shocked to hear this. And from a major lender.

Its almost self cert lending again.......

So hard to do an analysis though if you don't know all the details. For example, you talk about a single person but then you also mention "they". What does the other person do ? What about "huge amount of equity" ?

To me it often seems a bit strange that contractors are deemed less secure to pay off mortgages than people in "steady" jobs. These days you can be made redundant at the drop of a hat. Job for life no longer seems applicable, and a lot of contractors are natural salespeople - ie best placed to find themselves work and another job.

Thing is you're never going to get all the information that a bank does when you look at the decisions. I just don't think you can say one way or another whether the decision is a bad one or not as regards lending criteria.

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They was the same as the single person - I am talking about one person here.

And whilst yes permanent employees can be let go very easily - as we are all aware - the very nature of contract work is almost needing to assume that it is going to happen to you at every opportunity.

If you were lending your own money - would you prefer to give it to a permanent employee who had been at a place for 10 years and could provide details of this and bank statements - or someone who was trying out contracting for less than a year - had no company accounts yet - but could provide you a copy of their latest CV ?

If the deposits were the same - and there looks very little difference between the two in most cases - then it would be a no brainer for me.

One is hugely more risky than the other. At a high level of course.

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And as I have already said - the person themselves thought it was nuts - didnt expect to be accepted - and was actively told by the mortgage advisor before even providing any documentation to 'Go ahead and make an offer'.

She then got an agreement in principle within 2 hours.

Now yes I agree sitting down and going through the notes and details of this minute by minute would be useful - however I don't think we need this level of information to deduce these lending criteria were pretty mental and 'lax' to say the least.

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They was the same as the single person - I am talking about one person here.

And whilst yes permanent employees can be let go very easily - as we are all aware - the very nature of contract work is almost needing to assume that it is going to happen to you at every opportunity.

If you were lending your own money - would you prefer to give it to a permanent employee who had been at a place for 10 years and could provide details of this and bank statements - or someone who was trying out contracting for less than a year - had no company accounts yet - but could provide you a copy of their latest CV ?

If the deposits were the same - and there looks very little difference between the two in most cases - then it would be a no brainer for me.

One is hugely more risky than the other. At a high level of course.

I would want to look at their employment history and understand more about the nature of their work. In other words, the complete opposite of "computer says Yes/No" before I made a decision.

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Mods feel free to move to the Anecdotals section - but I thought it worthy of the main forum for a while.

Speaking to a work colleague this week. Bought a place 3 years ago. Also owns a previous place they rent out as an 'investment'. Not a huge amount of equity in it though.

Saw a place they really liked on a Monday 3 years ago. Called up their bank - Halifax - first thing Monday morning to ask about potential for mortgage for it. Wasn't expecting anything. Only had Ltd company for contracting set up for less than a year. Didnt even have one full year of accounts.

Bloke told her no problem. Go on and put an offer in on the place. He actually advised her to do that straight away. We just need a copy of your contract with daily rate on it and - wait for it - this is no joke - a copy of your CV.

They sent copies over to the Halifax - and had an agreement in principle by noon that same day. Put an offer in on the place - and mortgage fully agreed by the Wednesday.

A copy of your CV. A copy of your CV. A copy of your CV.

Now whether this was standard Halifax practice or a lone shark at it - who knows - it does however point pretty clearly to one of the reasons this bubble has started to froth over again in the last few years.

Even knowing how dodgy the mortgage industry in general can be - I was still pretty shocked to hear this. And from a major lender.

Its almost self cert lending again.......

I was offered a contractor mortgage from halifax and i can assure you it isn't self certified. You just have to make sure you pass the affordability test and need to be working continuously and satisfy the bank that your day rate is gonna be achievable in the long run.

Plenty of people use Ltd companies nowadays. Are you suggesting they shouldnt buy a house? Even though they earn alot more than the equivalent permanent employee?

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Its significant for me because - whilst I know that clearly lending has got a bit crazy again - I never actually realised it had gone this far. And this was fully 3 years ago. So if this has been happening all across the shop for 3 years well - it sort of explains whats happened to the market.

And for the record she was offered £400,000. Within 2 hours.

For a LTD company contractor that didnt have even one full years accounts but could provide a copy of her CV - which she wrote herself.

What was her day rate?

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And as I have already said - the person themselves thought it was nuts - didnt expect to be accepted - and was actively told by the mortgage advisor before even providing any documentation to 'Go ahead and make an offer'.

She then got an agreement in principle within 2 hours.

Now yes I agree sitting down and going through the notes and details of this minute by minute would be useful - however I don't think we need this level of information to deduce these lending criteria were pretty mental and 'lax' to say the least.

I think it would be useful, but it's just impossible.

Thing is, someone only has to miss out one tiny insignificant detail in their anecdote to turn a decision completely on its head. Like for example Dad/Mum is a multi millionaire and guarantees all the mortgages. And there could be 10 other things like this.

I just think the only way to be confident that a decision is lax is if you are the one submitting and know the entire details of the situation. With anyone else there is always a chance that there was something that you don't know about that was making a big difference to the decision.

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If you can afford it, it shouldn't take long to get a mortgage offer. I don't see the problem.

without knowing what she earns, how do we judge whether the lending is crazy?

From memory, I needed 25 or 30% deposit for the halifax mortgage. My mortgage was 650 a month and wages after tax 4,300. The asked for a cv to prove that I had regular employment

Hardly a gamble from the bank!

Edited by 999house
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I dont think you have read what I said - she was told - by the bloke on the phone - on her first call to enquire about the posssibilty - to put in an offer. No documents - nothing. Now she was an existing customer - so there is clearly something in that - however it was the speed at which it happened that surprised her and the lack of documentation. Clearly this bloke had already decided from the initial chat they she would be getting the mortgage. Thats not much due diligence is it !!

As for affordability test - this was before that - and as for convincing them you could continue with this day rate ? That was what her CV was for I assume.

Its extremely lax - and to show how quickly these things can turn around - just look at contractors in Aberdeen at present.

Day rate - dont know for sure - but between 2-350 I imagine

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This is an anecdote of three years ago?

I tried last autumn, also in the circumstances of having a new contract but no history of accounts as contractor. For a modest mortgage of around 50%, and the absolute proven means of repayment in less than a year (though not the intention of paying that quickly, as it would close off a good way of avoiding tax). Answer was no from several lenders, and the mortgage brokers didn't even call me back.

In '95 I wanted to borrow 50 grand to buy a house in the SE with 15K down as a deposit. I was earning around 2K / week at the time. Niet from Halifax despite banking with them for 20 years. "Call us back when you have a proper job, sonny". They told me. "Housing is finished", they told me. I raised the 50K elsewhere (LIAR LOAN) and sold the house for 100K in '97 having paid off the mortgage in 12 months.

Edited by davidg
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What was her day rate?

they calculate it based on 50 weeks on day rate and take that as your year salary. so if 4x then was £400 p/d or 5x would be £320 p/d.

Ive got a contract mortgage. They use the CV to make sure you've been in the industry for 5 years + in the same job. I had to show a years worth of completed contracts and that I was currently in a contract with at least 3 months remaining.

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The problem there was you wouldn't be paying much interest in the year before you redeemed the mortgage. I wonder what the response would have been if you wanted a mortgage for a longer term.

As I said, I did want it for a longer term. Until state pension age, to be precise.

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Porca Miseria - Think you mentioned this before - You checked your credit rating or similar ? You seem to have had real difficulty getting a mortgage in a situation where many others barely have to lift a finger. Strange.

Yes, I may well have mentioned it at the time.

They didn't even go so far as to check my credit record. Just the fact that I'm on contract, and have no track record of contract earnings since going onto PAYE in 2008.

As for credit, I have one creditcard, used for most of my purchases, and paid in full by direct debit each month. No potential blemishes, other than being a renter. One of the banks I applied to had, around the same time, invited me to increase the credit limit (already more than £5k and far more than I need) on that creditcard.

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They also use the CV to make sure you haven't been out of work for more than 3 months.

I look at lots of cvs. Always treat them with a pinch of salt and assume at least half of their cv is lies.

Really easy to rip the candidate once you have them on the phone or face to face....

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Was just about to mention the same.

So the CV is completely pointless - and a perfect 'due dilligence' check for the mortgage bod that actually means sweet FA ?

Shock horror.

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That is insane.

And I take it back what I said before about it being almost self cert.

In terms of the CV angle being used as 'evidence' - its 100% self cert.

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Did they even ask to see your business bank account to see evidence of your actual day rate pay ? Because if not - how easy is it to just fiddle with the copy and change a 4 to an 8.

Bingo - borrow 800k instead of 400k.

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They did request bank statements to evidence dayrate and deposit (which can be as low as 5% these days). They also asked for the signed contract, but had no issues accepting it despite it only having a month to run.

I guess that's the bit that shocked me the most. How can you lend seven figure sums on the back of an obviously short term business opportunity?

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