Self Certification Mortgages

Self-certification mortgages have been created by mortgage lenders to allow borrowers to ‘self-declare’ or self-certify’ their annual earnings.

Declaring how much you earn is a major part of the mortgage application process, and being ‘self-certified’ has been around for about a decade. Originally, self-certification (or self-cert) mortgages were purely for the self-employed and those who ran small businesses but could not provide traditional evidence of three years’ income.

Are self-certification mortgages just for the self-employed?

No, any person who has an irregular income could be eligible for a self-certification mortgage. For instance, those people who have seasonal jobs (those in tourism who make money during summer and little during winter) or those whose income is largely commission based, could be eligible for self-cert mortgages. Workers who receive large Christmas bonuses, or those whose salary comes from a number of different sources may also be interested in self-cert mortgages.

How do self-certification mortgages work?

Self-cert mortgages require the borrower or borrowers to state how much they earn on the mortgage application form. Although the borrower may not be asked to prove this, the lender could ask for business bank statements to check the gross income received. Those who already own a home may also be asked to supply mortgage statements.

How do self-cert mortgages differ from standard mortgages?

When taking out a self-certification mortgage, the borrower may be expected to place a larger deposit and in some cases pay a higher rate of interest. It is often the case that lenders will require a large deposit of between 75 and 85 per cent of the value of the property, although these figures do vary. Interest rates are slightly higher to represent the risk posed by the loan.

So would it be possible to make up earnings to get a bigger mortgage loan?

Lying about income when applying for any kind of mortgage is a criminal offence, no matter what an adviser or broker might tell you. This subject has caused some controversy, and the Financial Services Authority has reviewed self-cert mortgages. The FSA examined controls that lenders have in place to prevent mortgage application fraud and found them to be appropriate. Furthermore, as well as the legal risks of lying, borrowers who take out a loan beyond their means are likely to find themselves financially overstretched.

How should I go about getting a self-certification mortgage?

For more information about self-certification mortgage loans and to get a self-certified loan quote, please use our Mortgage Enquiry Form and one of our experts will contact you for further assistance.