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Self Certification Mortgages

Self-employed? Does your income fluctuate? A self-cert loan could be the answer.

In a Nutshell...

Self-certification mortgages can help the self-employed or people with an irregular income.

  • You can declare your income without having to back it up with accounts or payslips.
  • Interest rates are usually 0.5% to 1.5% higher than for conventional mortgages.
  • Fixed and variable rates as well as flexible features are available.
  • You may be able to remortgage to a cheaper deal when your circumstances change.

What is it?

Self-cert mortgages are for people whose income is difficult to assess using the usual methods. You can declare your income without accounts to back them up. The level of confidence that the lender has for you to be able to repay the mortgage determines the approval of the loan.

You may not qualify for a conventional mortgage if you run your own business. Self-certification mortgages can help if you have an irregular income and / or you are not able to show three years of accounts. Lenders tend to approve mortgage applications on the basis of long-term and regular income, usually with at least three years of payslips.

Who qualifies?

You may have to consider a self-cert mortgage if you:

  • Are self-employed
  • Get a large proportion of your income from commissions or overtime
  • Work on a contractual basis
  • Work part-time or irregular hours
  • Have numerous strands of income
  • Rely on bonuses as opposed to your normal wage

If your income fluctuates, this could be misleading and may lead to a conventional mortgage application being rejected. With a self-cert, the amount you borrow will be based on a signed declaration of your income. The lender will then make extensive credit checks and possibly look at bank and lender references, confirmation of previous ownership from solicitors and landlords' references.

That said, many lenders have relaxed their lending criteria, enabling you to avoid the sizeable fees and early repayment charges that can make self-cert mortgages expensive, so don't assume that you can only choose a self-cert mortgage.

Costs and charges

Interest rates are higher than for conventional mortgages because self-cert mortgages represent a slightly higher risk for lenders. However, increasing numbers of people have varying incomes, so rates have come down in the past few years to reflect this fact and more lenders are coming up with new and improved deals. Self-certs are normally 0.5% to 1.5% above mainstream rates.

You need to make sure that you can afford the repayments, whatever happens to interest rates. It's this affordability that the lender will be evaluating to decide whether or not you are suitable for a loan.

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