Self Certification Mortgage

What is a Self Certification Mortgage?

In the past, most mortgage lenders have insisted on checking applicants income by assessing P60’s, employer references, and for the self employed, 3 years audited accounts.

For those earning income in any way other than routine employment (for example contractors or those paid on commission, or those where a bonus is a large part of salary), this need to check earnings has limited how much could be borrowed, or even whether an applicant may or may not qualify for a mortgage.

A self certification mortgage enables those self-employed, newly self-employed, seasonal workers and sub contractors to borrow mortgage funds to their full earnings potential. Add to that the list of potential remortgage customers or house buyers that earn from a non-traditional standpoint and self certification (ie getting a self certification mortgage) is the only way that they can secure the finance that they need. True self certification means that the lender will not undertake any check of the income figure stated on the application by a prospective customer, by means of referencing or income documentation. In other words you, the customer, declare your own earnings!

Self certification mortgages are now supported by an ever increasing number of mortgage lenders, including mainstream as well as specialist lenders. Interest rates charged are now far more attractive and whether it is variable, fixed, tracker, stepped tracker, capped, all of these are available "self cert".

Historically self certification mortgages would have been restricted to a much lower maximum, but now, up to 90% loan to value can be achieved with certain lenders, whilst still keeping rates affordable.

Certain lenders will even take this further and carry out no status related checks at all, although this can reflect in the overall pricing and terms of the mortgage, it can suit potential borrowers who would normally have difficulty proving their earnings (eg contract workers), as well as those with a poor credit record. Most lenders will reflect the increase in risk attached to ‘non-status’ lending by restricting the loan to value to about 70 % of the property’s value, however it is possible to acquire a self certification mortgage of up to 90% of the value of the property. True non status means no aspect of your income or mortgage history will be checked, although it is usual for a credit reference check to be carried out.

Many people with non standard employment struggle to get a mortgage. Much of their income may be made up of overtime or bonuses (which mainstream lenders will usually only allow 50% of this income to be taken into account). The same applies to people on short term contracts or those who have multiple occupations (again many lenders will take only 50% of the income from a second job). For these people a self certification mortgage is the only real way to secure the required funding.

Self Certification Mortgage Checklist

If you can answer yes to any of the questions below then a self certification mortgage could be right for you.

Are you unable to prove some or all of your income ?

Is you employment non standard (i.e. contract worker) ?

Is a large portion of your income made up of bonuses and/ or commission ?

Have you been self employed less than 3 years ?

Have you only recently taken up your position and are unable to prove a track record of your on target earnings ?

Do you work off shore or abroad ?

Do you receive non standard income such as maintenance, working families tax credits, pension income, or investment income ?

Do you receive rental income from investment properties ?