Self certified mortgages
Are you unable to prove your monthly earnings?
If the answer is yes, then a self certified mortgage (or self employed mortgage) could be the solution. For those that cannot prove their monthly earnings in a normal way because they are temps, freelancers or self-employed etc, then self-certified mortgages can offer a way forward. Please note that they are not designed as a means to be dishonest or inflate monthly earnings on an application form in order to achieve a bigger loan.
It is the self employed who gain most from a self certified mortgage, as their earnings are irregular and they do not receive a set monthly earnings each month so do not meet normal lending criteria.
The amount you can borrow is calculated on you and your partner's annual monthly earnings, but mortgage lenders will also take into account any bonuses, commission, second monthly earnings, pension etc. This all adds up to the amount you will be able to borrow and is especially important in today’s expensive housing market.
The self certification mortgage market has grown over the years and is now available to the employed and self employed.
What is required to take out a self-certified mortgage?
The mortgage lender will normally require self certified applicants to have a minimum deposit of 10% before they will consider them for a home mortgage loan. However, only a small number of lenders will lend up to 90% of the property's value on a self-certification mortgage.
A self certified mortgage allows you to declare your own monthly earnings on the application without having to provide the evidence that is usually required when applying for a mortgage.
Instead of supplying the lender with bank statements, accounts or any other proof of monthly earnings, the lender will carry out a credit check and credit score. In some cases, they may request a lender's reference or landlord’s reference.
Does this come at a price?
A self certification mortgage poses a bigger risk to mortgage companies and this is reflected in their pricing. The interest rate you pay will be slightly higher than normal, but the rates are still competitive. The bigger the deposit you are able to put down, the better rate you will pay.
A self certification mortgage does not mean less choice. They are still available in all interest rate options: fixed rates, capped rates, variable rates, discount rates, tracker rates etc. and they are available for all different types of mortgage from first time buyer, to buy to let.
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