Self-Certification Mortgages Explained.
A self-certification mortgage is what is known as a niche product. They have been created with a very limited and special section of the mortgage market as the intended customer. "Self-certs" as they are called for short are meant for people whom, for various good reasons, cannot categorically prove their income by reference to annual tax summaries (P60s) or audited business accounts. A self-certification mortgage, therefore, is a mortgage where the amount you can borrow is decided by your actual income as declared by you but cannot be proved from the usual official sources.
What sort of borrower is the self-cert aimed to serve? Mostly the self-employed. Sole traders provide their accounts as proof of their turnover and earnings and where the enterprise has been running for more than three years, you do not need a self-cert but should apply for a standard mortgage. __If there aren't 3 years of accounts then you should consider applying for a self-certification mortgage. Other targets for self-certs are those employed people that get much of their income from overtime, commission and bonuses. In other words, money that is not prescribed in their contract of employment but is subject to short-term fluctuations. They may well find self-certification useful in getting the mortgage they require. Many mainstream lenders will not consider this type of income at its full value when deciding how much they would be willing to lend.
A good mortgage broker will have knowledge of and access to many lenders offering self-certs. These mortgages can be up to 90% of the property value. They may also have a number of exclusive schemes available through strong collaboration with specific lenders.
Of course there is a price to be paid for this kind of extra service and added risk.
Usually self-certs have an interest rate up to one percent higher than the usual standard variable rate.
Clearly self-certs are aimed at certain groups of people at certain stages in the economic lives. These stages are by definition temporary and having established a good track record of repayment of the self-cert there are good reasons to move on to a remortgage. This is where the borrower can change their contract, and even their lender for a more advantageous rate. Specialist mortgage brokers are the best people to advise on this too as they can do the shopping around and comparisons with the borrowers personal needs in mind.
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