October 19, 2009
No More Self-Cert Mortgages?
In the next few weeks the Government will release plans for the mortgage industry that may see the end of self-cert mortgage loans – but even if 'self-cert' styled loans were to end, there are still a lot of option open to those who cannot prove their income.
The Financial Services Authority will soon release new laws for mortgage lending, which may including banning any mortgages that do not need a proof of income. They feel that self-cert was abused for years by cowboy brokers and naive borrowers looking to get a better loan.
And there were a lot of self-cert loans on the market – according to MoneyFacts July 2007, 860 or 23% of the 3,803 prime residential mortgages were available through self-certification.
Self-certification mortgages were originally designed to assist people who could not accurately prove their true level of earnings, such as the self employed, contract workers or people with several sources of income. For this, they are great. But many people used them as a way of increasing their loan amount.
Darren Cook, analyst at Moneyfacts says: "The demise of the self-certification mortgage began shortly after the start of the current mortgage crisis, as lenders introduced much stricter lending criteria and began to shy away from higher risk lending such as self-certification and sub-prime mortgages.
"There would have been a place for self-certification mortgages in the market, but only if the product was prudently assessed for realistic declarations and sold to people whom it was originally designed to assist in the first place."
We will know the fate of self-cert in the next few weeks, but just because a certain type of loan is banned doesn't mean it's the end for those who cannot prove their income – a good mortgage broker will find safe, affordable deals for those who are self employed, freelance, work on commission or have more than one job.
So if you can't prove your income, don't worry – a mortgage adviser will always be able to help you find a mortgage that can work for your situation.
SOURCE: MoneyFacts, 13/10/09
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