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Self-cert mortgages (or self-certification mortgages) are still searched for quite often, but what exactly are they?
Over the years there’s been many different types of mortgage products/arrangements available, from schemes such as shared ownership and Help to Buy Loans, to 100% loan to value mortgages and self-cert mortgages.
In this guide we’ll discuss what self-cert mortgages are, whether they’re still available and some alternatives.
Simply put, self-cert mortgages were created for individuals who were unable to provide a proof of income, which naturally would be popular the self-employed, who generally find it harder to show proof of income.
It might sound crazy now, but these mortgage arrangements required no proof of income whatsoever.
That’s right – borrowers were able to self-certify their own income with no documents to back this information up!
Despite having higher interest rates when compared to a standard mortgage, not needing to provide a proof of income led to this arrangement becoming more and more popular.
No, the Financial Conduct Authority banned self-cert mortgages in the UK over a decade ago.
Unfortunately, individuals soon started to misuse self-cert mortgage declarations which, paired with unethical lending, led to the discontinuation of self-cert mortgages in the UK.
Consequently, self-cert mortgages are arguably a factor that played a part in the 2007-08 crash.
Now lenders are required to ‘lend responsibly’ (following the Responsible Lending Guidelines introduced by the Financial Conduct Authority in 2009), which is why lenders now request everything and the kitchen sink when applying for a mortgage.
At Rosehill, we take pride in building long-term relationships with our clients. We don’t see ourselves as just a mortgage broker, but rather a trusted partner who will be with you every step of the way.
At Rosehill, we take pride in building long-term relationships with our clients. We don’t see ourselves as just a mortgage broker, but rather a trusted partner who will be with you every step of the way.
In our opinion, self-employed individuals have it tough when it comes to providing proof of income. It’s not as simple as a few payslips and a P60 – you usually need to gather many more documents.
That’s why we specifically focus our efforts on helping self-employed people get mortgages.
That being said, if you’re finding it touch to show proof of income, there are some lenders that are more flexible when it comes to self-employed applicants, including those that consider:
3. Averaging declining profits
4. Change of trading style
5. Limited company directors using share of company net profits or dividends, plus salary
6. Using latest year’s income for a growing company
7. Rental income
8. Freelancer/contractor daily rate
9. Pension income
10. Investment income
11. Guarantor mortgages
Self-cert buy to let mortgages are also no longer available in the UK.
However, buy to let investments are usually ‘self-financing’, meaning the rental income exceeds the mortgage repayments to a level where you are making a profit.
Therefore some lenders have no minimum income requirements (although many will have a minimum income requirement, typically £25,000).
This can help when it comes to buy to let mortgages for the self-employed, where it may be tough to prove your income, particularly if you’re newly self-employed.
If your current mortgage was arranged on a self-certified basis, you may still be able to remortgage to a new mortgage product.
As self-cert mortgages typically had high interest rates, it may be beneficial for you to look for a new deal, as this could save you money.
Although your current mortgage has been arranged on a self-certified basis, your new remortgage would be subject to the current standard checks and affordability, so we’d recommend speaking with a qualified mortgage adviser to discuss your options.
Surprisingly, yes.
However, we do not advise this mortgage arrangement.
You will not receive the same regulation and protection from the Financial Conduct Authority if you arrange a self-cert mortgage outside of the UK.
We doubt it.
Self-cert mortgages were banned for a good reason.
However, the mortgage market is everchanging, with new products being introduced every so often.
If self-cert mortgages do return to the market, or a similar type of mortgage arrangement is introduced, we recommend being very cautious.
As a mortgage is secured against your home or investment property, it may be repossessed if you do not keep up with repayments on your mortgage.
We focus on building long-lasting relationships with clients.
We therefore charge a reduced fee for our existing client remortgages.
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As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments. Think carefully before securing any other debts against your home or property. The Financial Conduct Authority does not regulate commercial buy to lets and some forms of commercial mortgages. You may have to pay an early repayment charge to your existing lender if you re-mortgage
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The guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK. The purpose of any content on this site is to provide technical and generic information and should not be interpreted as a personal recommendation or advice.
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Rose Hill Financial Services Ltd is authorised and regulated by the Financial Conduct Authority. You can find us on the Financial Services Register https://register.fca.org.uk/ under reference 912303. Registered office address: 1 Bell Street, 2nd Floor, London, England, NW1 5BY. Registered in England and Wales. Company registration no: 11997519.
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