A self-certification mortgage is a method a declaring income that will be suited to an applicant who may have sources of income that are not easy to prove. It is important to note that a self-certification mortgage is not a type of product, rather it is a method of declaring income.
There are a number of different situations in which a mortgage applicant may not be able to provide full and verifiable proof of their income. This includes applicants who are self-employed, company directors, freelance workers, or workers who receive their income on an irregular basis through commissions and bonuses.
In many cases the actual income of the applicant may have been minimised for taxation purposes. Self-employed workers, for example, may utilise various tax minimisation techniques in order to save on income tax and company tax. When it comes time to apply for a mortgage their actual earnings may be understated, leading to a situation in which they are able to borrow a smaller amount than they can actually afford.
In addition to this, many self-employed workers do not keep accurate or complete records of income earned and therefore may not be able to supply several years of trading accounts to lenders upon application for a mortgage. This can make it difficult to secure a full-status mortgage from a high-street lender.
A self-certification mortgage is designed to help people in situations such as these. The mortgage application is based on affordability and the ability of the applicant to repay the loan, but does not require proof of income.
Instead of providing trading accounts, payslips or any other proof of income, the applicant must certify that they have sufficient income to service the repayments when they self-certify their income.
At any one time, there are a variety of self-certification mortgages available from various lenders. Terms and conditions vary between products and they are subject to change, so it is always a good idea to speak to a mortgage broker for up-to-date information.
