Self-Certification Mortgages
|
Loading...
|
|
|
When applying for a mortgage, a borrower will be asked to provide proof of income and must supply payslips or accounts to back this up. However, some people cannot do this because they may not have a regular income and this is where Self Certification - or self cert - mortgages come in.
They allow the borrower to declare their earnings without the need to supply the relevant paperwork.
A lender, when considering an application, will look at the self-declared earnings but also take into account their partner's income as well as any bonuses, second salaries or pensions the potential borrower might have. They will also carry out a credit check and might ask for a reference from, for example, a landlord as proof of financial reliability.
If this is all acceptable, the lender will provide the self-certified borrower with their mortgage. This, however, will usually come with a higher rate than a mainstream home loan. Also, the deposit required will often be significantly higher. Self cert borrowers looking for a 100% mortgage are unlikely to find themselves a deal.
Most of the usual mortgage options are available to self cert borrowers - fixed-rates, trackers and discount deals can be arranged. You can remortgage or sign up for a repayment mortgage or interest-only loan.
Who are Self Cert Mortgages for?
Self cert mortgages are designed, primarily, for people who are self-employed and therefore do not have a regular income. However, there are many other circumstances which contribute to an erratic bank balance. People who work freelance or in temporary employment might need a self cert mortgage. Anyone who does contract work, such as actors, or those who only work for half the year, in the holiday season, for example, may well need to opt for a self cert loan.
Pitfalls of Self Cert Mortgages
The "price" for self-declaring your earnings is a higher interest rate. Many lenders also require a much larger deposit than normal and if you cannot supply this, you might find the interest rate becomes even higher. First-time buyers will also find it hard to take out this type of mortgage.
There is the potential, with self cert mortgages, for borrowers to be dishonest about their earnings. Naturally lenders take a very dim view of this and remind customers that it is a criminal offence and they have controls in place to prevent this happening.
Ultimately, anyone who does lie will find they probably cannot keep up with the repayments for the mortgage they have been granted.
Where to buy Self Cert mortgages
A number of specialist lenders have been set up to provide self cert mortgages and some high street banks and building societies provide them too. As with all mortgages, it is important to shop around to find the best product to suit your own personal needs and an independent mortgage broker could be a good starting place. Comparison websites also include deals for self-cert mortgages although, unlike independent brokers, do not cover the entire market.
Comments
Newsletter sign up