Self-cert mortgages: the solution for a mortgage with no income proof?
What is a self-certified mortgage?
This is a mortgage where you, for whatever reason, do not wish to declare to the mortgage underwriter your precise earnings. You want to 'self-certify' that you earn enough money
to easily cover the mortgage payments.
Why wouldnt I want to show the mortgage company how much I earn?
There are good reasons, and bad reasons for not being able to show how much money
you owe! Bad: trying to borrow more than you can easily afford to pay back whilst
on a predetermined, fixed income (e.g. 'employed status') -- this has been dubbed a 'liar loan'
and is cited as one of the main reasons for the global banking crisis. A possible good reason:
You are self-employed, contracted or a freelancer with plenty of money coming in, but this
makes the production of pay-slips and other proof of earnings that the banks require more
difficult to produce.
Are Self-Certified Mortgages still available?
There are some mortgage products available, normally through mortgage brokers,
that may suit you IF you have a truly variable income. Self-cert products by name
have been generally stopped. Read more below...
Mortgages with no proof of income still available in 2014?
I have a reliable, but unpredictable income. Can I still get anything like a self-cert mortgage?
If you are NOT on a fixed income, ie NOT on an employed salary, you may be able to find a mortgage broker, online or otherwise, who can help you. These types of mortgages are referred to as 'contractor mortgages' or 'freelance mortgages'
You will still need a reliable way of proving your earnings history, and, increasingly, the lender will look to the taxation authorities as to what your net profit has been over the last two to three years.
Audiited accounts by a certified accountant also count as genuine proof of income for the self-employed, often , again, for two to three years.
Note that 'freelancer' or 'contractor' mortgages often, but not always, incur a higher interest rate than would one for an employed person. In the eyes of the lending institutions (the banks!) you are a greater risk than someone with a reliable income.
Note also that the initial fee you pay, though it can be added to the mortgage, needs to be taken into consideration as it will llikely be more than a high-street lender would get away with charging you to set up your mortgage.
Increase your mortgage affordability: there's loads of ways to trim our outgoings! Are you doing these things'?
So, what happened to self-certified mortgages?
They became known as 'liar loans'. But they didn't start out that way; the original intention was that self-certified mortgages would be for those who are, for example, freelance workers, contract workers, and generally people with a variable, indeterminate income--mostly the self-employed. What actually happened was that mortgage brokers applied increasingly self-certified mortgages to those with fixed incomes! (ie the employed people -- who had a stable and reliable income, but not necessarily one that could support the mortgage they wanted under the usual rules of 2.5 times annual income). Thus, there were a lot of defaults because people could acquire a mortgage far in excess of their paying ability--either because there was a personal crisis, through losing their jobs, or a simple inability to keep up with the mortgage payments. Thus, they were dubbed 'liar loans' and were regulated against by official bodies.
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