Self-Cert Mortgage
Self-Cert Mortgage | For People With Difficult To Prove Income
Many different types of borrowers could benefit from taking out a self-cert mortgage, particularly if they would find it difficult to prove their income. So what is a self-cert mortgage and who needs them?
A self-cert mortgage works like a normal residential mortgage product, except that when you apply for the homeloan you do not have to prove your income. With any mainstream mortgage you declare your earnings and the lender verifies this before making an offer but with a self-cert mortgage the lender does not check you income.
Of course, the lender is taking a higher risk on lending if it has not verified the income so a self-cert mortgage may have a higher interest rate than a normal deal. However in recent years intense competition has pushed down the rates in the self cert sector meaning that a self-cert mortgage can look fairly competitive when compared to prime mortgage rates.
Another difference is that with a self-cert mortgage you may be required to put down a higher deposit as the lender requires more security. For example you might need to put down 15 or 20 per cent of the property's value upfront.
A self-cert mortgage is suitable for many borrowers. Initially they were designed to help the self employed take out mortgages if they did not have three years' worth of full audited accounts to prove their earnings. These could be people who run a business or simply one man bands, such as mobile hairdressers or perhaps an electrician. With a self-cert mortgage borrowers can simply declare what they earned and the lender does not need to verify it
The market has developed further and now there are many groups of borrowers who may need a self cert product. They all have different reasons for preferring to not have to prove their income.
For example salespeople may have commission based earnings which mean that their income varies from year to year. They would find it hard to prove their future earning to a mainstream lender. Equally freelance or contract workers cannot guarantee exactly what their income will be as it fluctuates depending on the amount of work they have. Some people have more than one source of income, either because they have more than one job or perhaps they have a trust fund or divorce settlement in addition to a job.
If for any reason you would prefer not to have to prove your income a self-cert mortgage could be right up your street.
