Re-Mortgages UK - all about self certification mortgages

Self Certification Mortgages

If an individual is self employed, a contract worker or is employed but paid on commission only, then the best way for them to obtain a mortgage is to apply for a Self Certificate mortgage.

These mortgages have been available on the mortgage market for the last ten years. They were initially introduced in order to let individuals obtain a mortgage who have the funds available for repaying the mortgage but are unable to prove their earnings on paper.

High street mortgage lenders will use wages/salaries of the borrower that is shown on their P60s and payslips to determine how much money to lend the borrower. If the individual looking to purchase the mortgage does not fit the lenders criteria, then they may be declined from obtaining the mortgage loan.

By obtaining a self certification mortgage, the borrower will not need to prove their earnings. Instead they will however, need to provide a minimum deposit of 10-15%.

These mortgages are normally capped at 75% of the value of the property, however they can be capped up to 85% by using a more flexible approach. The interest rates charged on a self certificate mortgage are generally only slightly higher than the normal high street mortgage at an additional amount of 0.25% PA.

In recent years, these interest rates have gained more competiton due to the increase within the mortgage market of more self employed individuals. About 14% of the United Kingdom population have now become self employed and this number is forever on the increase. Due to this, a Self certificate mortgage has become more and more popular to the borrower. This also means that competition is on the increase creating a lot more offers from the mortgage lenders.

The rates available for these mortgages are generally variable rates, fixed rates capped rates and flexible rates.

When a self employed individual applies for a Self Certificate mortgage, they will be asked to provide their expected annual income. These mortgages are generally offered on the expected income of the individual rather than a documented evidence of it.

The mortgage lenders will normally loan an amount of up to three and a half times of the declared income or two and three quarter times the joint income on a joint application. Although in some circumstances, if a deposit is provided of 25% or more then the mortgage lender may offer a higher income multiplier on the declared income.

After the mortgage lender calculates how much the customer can borrow, the customer can decide how much they can afford to pay each month. They should be very careful when deciding this. Both extremely high income as well as an abnormally low income used as the basis for deciding their monthly payment can cause problems.

The best way for an individual to obtain a self certificate mortgage is to use a specialist broker. These brokers will be able to gain access to the whole mortgage market within the UK and due to their independence; they will be able to obtain the best self certification mortgage for the borrower. With these self certification mortgages the individual will not need to provide their pay slips or accountants’ statements in order to confirm their income.

Borrowers will be able to have a number of choices with a self certified mortgage as they would with a regular mortgage. They could have a flexible mortgage, which means they could pay more mortgage payments within the months when their income has increased and in the months where their income has decreased, they could pay less or even take a payment holiday. Likewise a self certified mortgage will come with features such as tracker rates, fixed rates, capped rates as well as other interest alternatives.

A Self certification mortgage is not solely for self-employed borrowers nowadays. If a mortgage borrower has more than one source of income, as a lot of people do in these recent years, then these mortgages will mean that they will not need to prove it. 

Therefore, if they have a second job, or extra money from investments and they need that income amount to include when applying for their mortgage, there are many lenders that will suit their needs.