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 Money
Page > Mortgages
> Self Certification Mortgage - UK Guide
 In a
nutshell
A mortgage for people that find it hard
to prove their income.
Best
Mortgage For
Self employed people, contract
workers, freelancers, people with credit problems, people in
changeable employment.
Mortgage Type
Self
certification mortgages come in all shapes and sizes. So, for
example, you'll be able to choose from standard product types
such as a repayment mortgage or an interest only product.
You'll also be able to tap into various deals - i.e. fixed or
capped rates, discounted deals, trackers, variable rates etc.
Any deal you choose will usually last for between 1-5 years
and then you'll switch to a pre-agreed mortgage type such as a
variable rate or a tracker.
Typical
Amount to borrow
You have some flexibility here as
you are responsible for declaring your own income rather than
having to prove it with payslips or accounts. So, to a certain
extent, you can borrow what you like. Lenders do have controls
here (although not all of them will use them) - these will
vary from lender to lender and can include looking at your
bank statements, running credit checks or asking for
verification from your accountant for example.
Deposit
This will
vary from lender to lender and it is possible to pay a minimum
5% deposit or to borrow more in certain cases. Some lenders
will increase their controls if you want to borrow more than
75%. You may find that many lenders will ask for a higher
deposit here as you are perceived as being a higher
risk.
Advantages
If you're
self-employed, have an erratic income or will find it hard to
prove your income, then you might not qualify for standard
mortgage products. For example, if you're self employed,
lenders may ask for up to three years validated accounts
before you can access a standard mortgage. This kind of
information may be impossible to provide.
So, a self
certification mortgage allows you to bypass this rule and
simply state your income which your lender partly takes on
trust, thus allowing you to take out a mortgage.
What to
look out for
Some people have tended to exaggerate
their income to borrow higher amounts via a self certification
product. Lenders do check your requirements but it is possible
to borrow more than you can actually afford which can lead to
severe financial difficulties down the line if interest rates
rise. So, it's recommended that you are honest here and use
your common sense. Some lenders will not actually allow
first-time buyers to take out a self certification mortgage or
will insist that they put down higher deposits to show their
commitment so you'll need to check this out with any lender
before you apply.
You may also find that the rates
you'll be offered for self certification mortgage in general
are not as good as they would be for a standard mortgage. But,
if you are able and willing to put down a higher deposit you
may be given access to standard rates.
Alternatives
Many
flexible mortgage providers are targeting those in need of
self certification, so this might be an option for you. It's
always worthwhile talking to a mainstream mortgage provider
first just to check whether you could meet their criteria and
get a standard deal.
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