Getting mortgages isn’t easy and the financial institutions are extremely wary of who they are lending the money to. Mortgage seekers need to have immaculate and flawless financial credentials, and they are required to accompany their application with a referral letter that attests their character and reliability. These letters play a major role in enhancing an application’s credibility, thereby leading to more chances of selection. While these steps are obligatory in nature, a well-drafted reference letter highlights details that go well beyond the applicant’s credit score and mortgage paying history.
While trying to secure a business mortgage, lending institutions usually ask borrowers for an accountant-approved mortgage reference. Since accountants are an integral part of the business and manage the day-to-day finances of the company, lenders consider them to be a reliable point of contact. Accountants are in the position to provide accurate information about the business, and the lending companies would usually want testimony from the accountant, in the form of a reference letter, that the business has a steady flow of income and is capable of making timely repayments.
However, it should be remembered that some lenders may ask for more financial and accounting details and documents, apart from the three mentioned above.
To help their accountants make a compelling mortgage reference letter, businesses should maintain up-to-date accounts, at least for the past three years, with the most recent year ending within the last six months. Financial institutions may also require other management details and information, such as draft figures and forecasting numbers. It is advisable that companies maintain up-to-date accounting information on an efficient accounting software so that it is convenient and hassle-free for the accountant to extract and compile the business data and financials, whenever required.
While predicting the future business forecast earnings in a reference letter, businesses and accountants should be very careful that the numbers are realistic and attainable because the lending companies will want to verify all the historic data on the basis of which the forecasts have been made. Therefore, utmost care should be taken while making forecasts, as the historical data cannot be amended, and incorrect forecasts may lower the potential of the mortgage reference. Sometimes, lending institutions may even ask for a specific SA302 form from the Her Majesty’s Revenue & Customs (HMRC). The HMRC supplied SA302 form functions as a third-party evidence. The form has to be requested from the HMRC, as it is not available online.
Individuals who are not UK citizens but are working in the UK, have to renew their Visa from time to time. To apply for a Visa or renew an existing one, individuals have to fulfil certain requirements set by the UK Border Agency (UKBA), one of which is to get a reference letter from their accountant. There are usually two types of Visa reference letters made by accountants: a basic reference letter and a financial reference letter.
A basic reference letter for Visa certifies that the accountant is working with the individual or business, and offers basic details about the individual/company, such as names, dates etc. The basic reference letter doesn’t have any financial information or details. On the contrary, a financial reference letter for Visa includes complete details about income and finances, and it is usually used for Tier 1 Visa applications or for indefinite leave to remain applications. This reference letter holds extreme importance in the Visa application, and it is mandated by the UKBA that the letter should be completed and signed by an accountant who is affiliated to a recognised professional firm, specifically the ACCA or the ICAEW. The letter comprises several details including the personal income (for individuals) and salaries and dividends (for business owners).
Other individual or company-specific financial information may also be asked to submit. Individuals/businesses are required to work extensively with their accountants to ensure the information being disclosed in the letter is accurate and not misleading in any manner. The basic intent of the letter is to testify the individual/company has been legally hired or doing business in the UK.