Self Cert Mortgage

Self cert mortgage options are available

"Ideal for self-employed and those with fluctuating incomes".

Mortgage lenders normally approve mortgage applications on the basis of long-term, regular incomes, which usually require 3 years of payslips.

To qualify for this conventional mortgage, those who have their own business and are unable to show three years of accounts, or have an irregular income, may struggle.

This is where self-cert mortgages can help.

Self-cert mortgages are ideal for those whose income is difficult to assess using the normal methods. Incomes may be declared without accounts to back them up.

Decisions on whether or not to lend the requested amount will be dependant upon how confident the lender is that you will be able to repay the mortgage.

It may be necessary to consider this type of mortgage if:

• You are self- employed
• Your income is mainly from overtime or commissions
• You work on a contractual basis
• You work either part-time or irregular hours
• You have numerous strands of income
• You rely on bonuses rather than your normal wage

A conventional mortgage application could be rejected if it is normal that your income fluctuates.

With a self-cert mortgage, you make a signed declaration of your income. The amount borrowed will be based on this. Extensive credit checks will be made by the mortgage lender. Bank and lender references, confirmation of previous ownerships from solicitors and landlords' references may also be checked.

However, don't assume that being self-employed means that you can only choose a self-cert mortgage. Many lenders have relaxed their lending criteria.

Self Cert Mortgage Costs

Self-cert mortgages represent a higher risk for lenders and, therefore, interest charges are slightly higher than for conventional mortgages.

Recognising that increasing numbers of people have varying incomes, more lenders have come on to the market with new and improved deals. Self-cert mortgages are normally 0.5% to 1.5% above the mainstream rates.

You need to make sure that you are able to make the repayments, whatever happens to interest rates. Lenders will assess the aspect of affordability when making their decision.

Just as with conventional mortgages, self-cert mortgages offer fixed and variable rates and flexibility.

Those with newer, less established businesses may struggle with unexpected rate rises, so a fixed mortgage offer a better alternative.

For the more established business, a variable tracker rate may be better, as it allows payments to fall if the base rate falls.

Flexible rates allow contract workers to make overpayments when possible and underpayments when necessary.

Starting off with a self-cert mortgage doesn't mean that you must stay with the product. Changes in circumstances allowing you to prove details of a full income should allow you to change to a mainstream mortgage. For those who are self-employed, the same may apply if you are able to build up two or more years of accounts.

It is vital that you check whether you are able to remortgage without vast early repayment charges or how long it will be before you can remortgage without penalty.

Mortgage Resources

Council of Mortgage Lenders
Provides a wide range consumer information on mortgages and a mortgage calculator.

Financial Services Authority
Independent body that regulates the financial services industry in the UK.