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Self Certification Mortgage

If you are a homebuyer who is self-employed and looking to get a mortgage a Self Certification Mortgages could well be ideal for; you may be un-able to prove your income through the usual channels, but with a self certification mortgage this need not be a problem. Most mortgage lenders are willing to accept business accounts for the three year period prior, however if your business is not three years old you may find that getting a mortgage becomes a difficulty. And even in these circumstances your accountant may have minimized the records of your income for tax purposes. Self-certification mortgages sidestep this situation by allowing you to state your income without said documentation.

What you will need

Roughly 14% of the UK population are registered as self-employed, and Alodis (an organisation that offers guidance to those self-employed), predicts that, in 10 years time, there will be about 3.2m in this position.
Many self-employed people are high earners. But, if they want to get on the property ladder, they are likely to come across quite a large hurdle - standard mortgage lenders tend to be extremely apprehensive when it comes to negotiating a mortgage with anyone who is un-able to prove their income through the means of pay slips.

A self-certification mortgage is a mortgage accessible on the foundation of you stating what your expected income will be, rather than submitting documentary evidence. In most instances you will need to write a letter or get your accountant to state your earnings and vouch for your ability to make repayments. As well as this you will need to have a substantial deposit for a self-certification mortgage.

Non-standard mortgage

Self-certification mortgages are labelled under the supposed non-standard heading and there are around fifteen lenders in the market. The market is becoming much more spirited and therefore deals are improving. It is still likely you shall pay more, but there should still be the prospect to change to a better rate - and, often, another lender - a few years down the line.

You are requested to pay a higher rate because statistics show that the majority of businesses fail within their first two years of trading. And if in this eventuality you are left with large debt there is a risk you could lose your home.

However, some self-certification mortgages are better than others, and, if cash flow is a problem, it's worth taking a close look at those that offer payment holidays and the facility to inject more funds in when you can. It may well be worth seeing a mortgage broker, as they can explain any workings, but be do make sure that it is a reputable firm and regulated under the mortgage code. Whereas standard mortgages typically offer a 95% loan to value, self-certification mortgages will almost always necessitate a higher deposit: a loan-to value of 90% and, more frequently, 75% is usually offered. These mortgages are charged at a rate that reflects the self-certification capacity. If, after a year, the mortgage account has been well conducted, the rate can regress to the Standard Variable Rate or, lifetime tracker mortgage.