What is a Self Certification Mortgage?

Introduction

Self-certification mortgage is a mortgage scheme where it is possible for the borrower to declare how much they earn from employment. This scheme was introduced about ten years back to help small businesses and self-employed people who would not be able to produce the standard three years income proof that lenders routinely ask.

Who can Benefit

Apart from small businesses and self-employed persons, self certification mortgage can also help anyone with irregular earning patterns. This includes people who are in seasonal employment or commission-based jobs such as sales.

What it Takes

However in self certification mortgage, the borrower may be asked to put down a higher deposit than other mortgage schemes. The interest rates also may be higher than routine mortgages. The borrower is asked to make a deposit of 70-80% of the value of the mortgaged property. Further, the lender has to be shown statements of the borrower’s bank transactions, so that the lender can verify the borrower’s gross income in a year. If the borrower already has a home, the mortgage statements of that also have to be provided to the lender.

Be Cautious

In some cases the lender may not ask for proof of your annual earnings. However this should not tempt you into lying or exaggerating. It is a criminal offense to lie about your earnings by the rules set by the Financial Services Authority (FSA). The rules are stringent and if you are caught with a lie, you will receive a criminal record. In any case it doesn’t make sense to take a higher loan with false statements- chances are you will not be able to keep up with the repayment plan.

Self Certification mortgages are available with a variety of interest ranges. As a rule these rates higher than routine mortgage interest rates. Do your research and take the help of a good mortgage broker. He or she will be able to guide you to a self certification mortgage that best suits you.