Are Self-Cert Mortgages Still Available?

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Are Self-Cert Mortgages Still Available?

What are self-cert mortgages?

Self certification mortgages, which were more commonly called Self-Cert mortgages, were a type of mortgage that was available in the UK some time ago. They enabled those people who were unable to prove their income, usually Self-Employed applicants, to declare their own earnings, for the purposes of a mortgage application.

Interest rates were very high, in order to mitigate some of the risk to the lender in offering a loan to borrowers with no proof of income or that they would be able to repay it.

Why aren’t they available?

Self-certified mortgages were banned in the UK in 2009 by the Financial Conduct Authority, due to the exploitation of vulnerabilities in the process, whereby borrowers were allowed to claim that they earned more than they did, in order to achieve a higher loan.

This practice led to many people borrowing considerably more than they could afford to repay, which played a role in the financial crisis in the UK at that time. A set of guidance was introduced for all Mortgage Lenders to follow, known as the ‘Responsible Lending Guidelines’.

Getting a self-cert mortgage overseas

Self-Cert mortgages are still available in some overseas countries, with a small percentage of UK firms relocated abroad in order to avoid UK regulations.

The Financial Conduct Authority advises strongly against considering a Self-Cert mortgage from an overseas lender, due to the significant financial risk this would incur.

Why is it not advisable to obtain a self-cert mortgage?

Overseas Mortgage Lenders are not governed by the Financial Conduct Authority or UK law, which means that you would not be protected against serious financial risk, should you choose this method of borrowing.

Also known as liar loans, Self-Cert mortgages put you at risk of mis-sold products and offer no financial or legal protection.

What are the alternatives?

There are plenty of alternative routes to home ownership in the UK for Self-Employed borrowers these days, with most Mortgage Lenders high street extending their deals to Self-Employed applicants and some independent lenders even specialising in that area.

There are lenders who will offer mortgage products to every type of Self-Employed applicant, whether you’re a Sole Trader, Contractor, Limited Company Director or partner, there will be a mortgage option available to you.

Although lenders have slightly varying criteria, if you are able to provide any of the following forms of income from Self-Employed activities, there will be UK lenders who can help:

  • Freelance income
  • Investment income
  • Rental income
  • Salary and dividends
  • Share of net profit
  • Pension income

Even in complex circumstances, like a history of debt and only having one year of accounting history available, it’s possible to secure a mortgage through some of the more specialist independent lenders.

Speak to First Step Mortgages

Here at First Step Mortgages, we specialise in mortgage advice to help those with less traditional mortgage applications to find a competitive deal. Whatever your circumstances, we can help you prepare for your Self-Employed mortgage application and ensure that you fully meet the criteria necessary of your chosen lender.

Your home may be repossessed if you do not keep up repayments on a mortgage