Self-cert mortgages
A lender will usually need proof of your income, but sometimes, they will rely on your own assessment of income (‘self certification’). Self-certified mortgages were designed to cater for people who are self-employed and have difficulty in showing that their earnings are enough to make the payments on the mortgage they are applying for. This could be because they have not been trading for long enough, they have more than one job, or they rely on bonuses for a large part of their total pay.
Self certification mortgages - also known as 'non status' or 'self cert' mortgages - have shot to popularity thanks largely to changing work practices in the last couple of decades that have left a large number of people on short term or part time contracts, or dependent on bonuses for a sizeable portion of their income.
Self-certification mortgages are for people whose income is difficult to assess using the standard methods adopted by most conventional mortgage lenders. They allow you to 'self declare' your earnings.
Bonuses, commission and seasonal work can cause income to vary over time or be difficult to guarantee and this may not be considered acceptable in order to get a mainstream loan. Many customers, who go on to be excellent mortgage customers with specialist lenders, routinely fail credit scoring processes with mainstream lenders. While most self-certification mortgages are also available to the self-employed, they are not exclusive to them and some of the following groups also opt for this type of product:
- Unsalaried company directors
- Contract workers (increasingly common in technology-based industries)
- Commission-based workers (often in sales, recruitment etc)
- People with seasonal earnings
- Those with more than one income
- City workers or others who receive a high annual bonus
- Borrowers on a low wage who have an inheritance fund or other family income
- Freelance workers
Self-certification is the process by which the amount that a customer borrows is based on what they claim is their income as stated in a signed declaration in the application form, but where they don't have to prove it on the basis of their accounts.
Don’t let anyone persuade you to overstate your income in order to get a very large loan. As well as ending up with a mortgage you can’t afford (which could lead to you losing your home), you’ll also be committing a fraud and could get a criminal record.
