Self-Certification Mortgages

Self-certification mortgages – A mortgage lender will usually require proof of your income, but some are prepared to rely on your own assessment of income (known as self-certification).

But many would-be borrowers are unable to provide sufficient evidence of their true earnings. You may be self-employed but have not been trading long enough to show accounts (most lenders want to see three years’ worth of audited accounts). You may have more than one job or have income from sources not usually recognised by lenders, such as tips, pensions, investments or maintenance payments. Your payments might be irregular or the form of bonuses and often involve income deriving from more than one source.

At mortgagesplease, we have the knowledge and expertise to find the most appropriate mortgage from the ever-increasing number of specialist lenders and products available, including lenders working with self-certification. Whatever your profession and your employment status, we will know the best way to obtain the most suitable mortgage for your circumstances. 

The idea is that instead of showing your income and accounts in the usual way, you simply self-declare your earnings. However, some lenders insist on other forms of proof, such as

–        An accountant’s certificate: this is a document signed by your accountant to say that your income is sufficient to service the loan requested. 

–        You may also be asked to produce your business bank statements for a set period, so that the lender can see the gross income you have received.

–        And most lenders will supplement this information with their own credit searches.

–        If you are a home owner, you will be asked to supply your existing mortgage statements; if you are renting the lender will ask for a reference from your landlord.

Self-certification mortgages usually have higher rates of interest than a conventional employed person’s mortgage, so if you can prove your income you are likely to be better off not opting for this type of mortgage.

Self-certification mortgages – pros and cons:

PROS:

-         Self-employed people gain access to finance that they would otherwise not be able to access.

-         Some lenders will allow you to borrow up to 95% via self-certification.

-         Some self-employed borrowers needing a mortgage in a hurry use self-certification to speed up the process.

CONS:

-         Some lenders will only allow you to prove your income like this if you the amount you want to borrow less than 75% of the value of the property. In such a case you will need a substantial deposit.

-         A lender usually views this type of deal as more risky than a standard mortgage, so they charge a higher interest rate as a result.

-        If you state that your income is greater than it really is then you are committing mortgage fraud, which is a criminal offence. As with all types of mortgage, the safeguards on maximum borrowing are in place for the good of the borrower as the lender. If you cannot meet the payments because circumstances change, such as a big rise in interest rates, you could lose your home.