Self-Certified Mortgages

Getting a mortgage can be difficult, especially if you are self-employed or
have an income that fluctuates from year to year. If you look at it from the
lender’s point of view, you can see why: although you are putting up a
house as security, the lender is still taking a tremendous risk with money
that it may itself have to borrow from other banks. For this reason,
lenders want to be able to verify that you have the necessary income
to pay them back before they lend you thousands of pounds. This can
be difficult if you are not a full time employee, and that is why there are
self-certified mortgages available.
A self-certified mortgage is one in which you provide the bank or
mortgage company with a declaration of your own income.
While a self-employed mortgage requires you to provide three years of
account statements to show how much money you have made, a
self-certified mortgage requires far less proof. In essence, you are
telling the bank to “trust me,” but you do provide some documentation.
Here is how the process typically works:

• You provide the lender with a signed declaration of your income.
In theory, this should be enough for the lender, but in fact, you will have
to back up your claims with some further proof:

• Have your accountant provide a signed certificate stating that you have
enough income to pay back the requested amount

• The lender may also request your past bank statements for an amount
of time so they can look at just how much money you have been making

• Other documents that may assist you in getting a self-certified
mortgage include past mortgage or loan statements showing that you
have made payments regularly, rent receipts or a reference from your
landlord to show that you have paid your rent reliably, and, if applicable,
any contracts or letters of reference from clients.

• The lender will also run a credit check on you, so it is important to
prepare your credit rating for the future by paying off your credit cards
regularly, meeting any loan payments, and guarding yourself against
identity theft.

Self-certification mortgages are considered a “higher risk” product by
many banks and lenders, so you may have trouble finding one that has
competitive terms. In addition, you will probably need a substantial
down payment, because most lenders will not offer more than 75
percent of the total value of the loan on a self-certified mortgage.
Even with these drawbacks, a self-certified mortgage is a great
way to get into the housing market, even if you do not draw a regular paycheque.