Self Certified mortgages

Self Certified Mortgages

explained

The process of self certification simply means that you declare your own income without the need to provide supporting documents. With a traditional mortgage you need to get your employer to provide proof of you income to the lender.

These loans are designed for people who cannot show the mortgage provider that they have a regular guaranteed income which they will use to meet the mortgage repayments each month. The main target market for these type of loans is the self employed, who's income varies greatly. The ever increasing flexibility of the labour market has caused many people to move jobs more regularly or undertake more contract/temporary work. As a result it has become harder for mortgage applicants to prove they have had a steady regular income. As a result self certified loans have become increasingly popular in recent years. They often appeal to a people in various forms of employment:

- Short term contract or temporary workers
- The Self Employed
- People with multiple income streams/jobs
- Those whose income is heavily weighted towards commission and or bonuses
- Freelance workers
- Seasonal workers

These mortgages are often used by people on low incomes as they may allow them to borrow more than with a traditional loan under usual lending criteria based on multiples of salary.

Instead of basing their decision on your salary the lender will often rely more on credit checks and references from landlords etc.

There are 2 main tools the lenders will use to base their decision on:

1. the affordability test:you may be asked to breakdown your living expenses each month to show that you can afford the repayments
2. suitability checks: lenders often want to know exacts details regard the reasons for your move or personal circumstances to ensure that the purchase/remortgage you are making is suitable for a person in your circumstances

Because the mortgage lender doesn't have proof of your income they will want compensation for this higher risk. As a result the interest rates on these types of loans tend to be very high compared with traditional deals.