What is a Self Cert Mortgage

A self cert mortgage offers you the ability to get a mortgage when you are self employed.  The self cert mortgage was created about ten years ago because of the demand for a mortgage option for those who were self employed.  The self employed individuals were having trouble getting their mortgage applications approved because of a lack of proof for income.  The self cert mortgage can also work for anyone who is unable to show their true earnings.  In other words anyone who has a job such as freelance or a personal business would need to obtain a self cert mortgage. 

You will find for a regular mortgage such things as three years of accounts, tax paperwork, and other proof was asked for.  In some cases these items were not available.  Today when you apply for a self cert mortgage you will be asked to show some proof of profits, your credit scores will be looked at, and your credit history.  The self cert mortgage companies will want to see how much paperwork you have in order to prove income, but will not base the application process solely on the income you make.  While income will determine the risk the lender will have in investing in you, they will also look to see how well you have handled other areas of finance, as well as looking at where you have lived.  The electoral roll in the UK is very important to establishing residency and the places you have lived during your life.  The lenders are going to be looking for consistency in your history.

For a self cert mortgage there are a few things you should be careful of.  While it used to be nearly impossible to get a mortgage at all you do have an option of the self cert mortgage that will offer a fixed or variable rate.  In other words depending on the amount of a deposit you can bring to the mortgage table you may be able to get a fixed interest rate, which was almost impossible before.  In order to qualify for a self cert mortgage with a fixed interest rate you have to show proof of savings, have at least a 20% deposit, and be willing to take the higher interest rate you are offered.  The risk you pose as a self employed individual to the banks is very high.  They have no way of getting their money back with a self cert mortgage unless the house is foreclosed on for what you owe.  It is very easy for you to default on a self cert mortgage in the banks mind.  Therefore they try to make the most they can while you are paying your loan.

In some cases a self cert mortgage lender may ask for you to pay more in monthly payments than the actual loan.  In this case they are asking for money to be placed in escrow in order to make sure they will be paid properly.  This type of mortgage can help you get out of renting, but research is needed into the viable options.