Take care applying for your next mortgage

On 1st September 2011 there was a fairly low-key launch of a new service that banks and building societies have access to when you next apply for a mortgage.

Known as the ‘Mortgage Verification Scheme’ it allows banks and building societies to cross check the income figures declared on a mortgage application form to those that have been declared to HMRC already.

It is said that these checks will only take place where the mortgage lender suspects fraud is taking place or inadequate evidence of the earnings is provided.

The results of the check will then help the mortgage lender to assess the risks involved with lending and presumably will allow them to either downgrade the level of any mortgage given or refuse the mortgage application entirely if the official earnings are lower than those declared.

However, it does allow the mortgage lender to help confirm an application where verification is proving difficult.

This is a positive step by HMRC and mortgage lenders in helping to reduce the burden of paperwork involved with verifying a mortgage application.  Previously, if an applicant was self-employed the mortgage lender would insist on an accountant’s certificate to confirm the level of income declared.

However, one of the stipulations was that the accountant had to be a member of a recognisable body and be ‘chartered or certified’.  This caused many problems and additional costs (to the applicant) if the accountant was not a member of a recognisable accountancy body.  With this system it should mean that verification should be automatic and less emphasis be on the accountants’ qualification.

Furthermore, it would allow accountants to resist the temptation of inflating clients income declared to the mortgage lender should this question be asked by their client.



Posted by Chris Mollan