Self Certification

Mortgage lenders traditionally use income multiples to determine how much they are prepared to lend.

They will look at historical evidence of  earnings, but will not consider projected commission or bonuses (unless guaranteed). If you are self employed, the lender will not consider your current order book.

Some mortgage lenders take a more pragmatic view and have recognized that there are people whose actual earnings are higher than they can prove. For these people, the Self Certification mortgage was introduced

With a self certification mortgage, you state what your income is, but you do not have to provide proof of this income. 

You will have to put down a deposit. A 10% deposit will be the minimum, however you will get better rates and terms if you are able to increase the deposit to 15%.

Self Certification mortgages are available to both employed and self employed.

Competition between Mortgage lenders has bought  interest rates down such that they are now only marginally above High Street interest rates 

Self Certification for Employees

Self certification mortgages assist those employees whose earnings come from several sources and/or includes an element of commission or bonus

If you earn commission or bonuses then traditional lenders will consider half of this providing there is historical evidence of these payments. This can be problematic for someone who has not been in their job long or whose commission payments have been low.

Self certification mortgages are particularly suited to people working in sales.

Employees who have more than one job would qualify for a self certification mortgage

Lenders will generally check that you are employed and the length of time with an employer. They like to see evidence of stability and commonly require continuous employment for at least one year.

If you are a director and own over a 15 - 20% shareholding then the lender will regard you as self employed

Self Certification for Self Employed

If you are self employed the traditional requirement is for 2 or 3 years audited accounts. The lender will look to see that there is a history of increasing profits and may turn down the application if profits are decreasing. The lenders look at your portion of the net profit and any drawings (salary) you have made. These accounts may show a relatively low net profit. This could count against you. Accounts provide a historical picture which may differ from your true earnings

Self Certification lenders generally require that you have been self employed for at least 12 months. A small number of lenders will consider a period of just 3 or 6 months

With a self certification mortgage you simply enter your current earnings. Providing the amount you are looking to borrow is within the income multiples of the lender concerned and you pass the lenders credit checks then the mortgage is granted

Lenders vary as to the degree of checks undertaken. Some lenders will write to your accountant and request an affordability certificate - Although the lender is not asking for your income, they are putting the onus onto the accountant to assess the affordability. Other lenders may only check that you are trading and the length of time you have been trading.

Most lenders prefer that you have an accountant but their are lenders that do not require this. Please contact us to discuss your situation.

Self Certification mortgage applications

You declare that your income is a certain amount and the lender's underwriters will consider whether this income is reasonable, given the occupation.  

The lender will  look closely at existing credit agreements and how these have been conducted. If there is a history of arrears and missing payments, then lenders will be particularly cautious.

Most self certification mortgages are arranged through Mortgage brokers such as ourselves.

Self Certification and Adverse credit

You may have collected some adverse credit in the past (for example county court judgments or arrears). This is unlikely to prevent you from getting a self certification mortgage. Lenders will price in the extra risk into the interest rate. 

Depending on the severity of the adverse credit and how recently it occurred. You may have to put down a higher deposit.

We can arrange self certification  mortgages with some adverse credit with a 10% deposit. Depending upon the nature of the adverse credit and when it happened, a larger deposit may be required.

Please discuss with your mortgage advisor.