Self Cert Mortgages For The Self Employed
Attitudes towards mortgage lending have changed in recent years. The growing market of self employed - freelancers, contractors and consultants - has meant that mortgage providers have had to find a lending solution which gives them access to all that earning power. The old 'nanny state' attitude of always checking with an employer for how much a mortgage applicant earned was no longer fit for purpose. This increasing pool of well-heeled freelancers, contractors and consultants needed mortgages too....and they could afford them. So the answer was the self cert mortgage.
It's true that self cert mortgages are not ideal for everyone. But for the market they're aimed at - the self employed, who are used to taking responsibility for their own finances - self cert mortgages probably do make a very good fit. A Self cert mortgage is ideal for those whose cash flows do not fit into the usual models that mortgage providers use to assess suitability - for instance, those who rely on huge bonuses at the end of the year.
So how do self cert mortgages differ from other standard mortgages?
Well, with self cert mortgages, the lender does not ask for proof of how much you earn although all lenders reserve the right to check if they feel it necessary. So the onus is on you to be honest, as much with yourself as anyone else. These days, providers of self cert mortgages could lend you up to £1 million if you have a deposit of 20% and your income stacks up with their idea of affordability. However, if you only have a deposit of 5% you can still get a self cert mortgage of approximately £250,000 - although this varies between lenders. The higher the deposit you have the more choice of lenders there are and the larger the amount you will be able to borrow.
Interest rates for self cert mortgages are slightly higher than standard mortgages - because the risk is higher, or so the providers of self cert mortgages think. However, self cert mortgages are becoming more competitively priced as more enter the market, and being self employed becomes seen as less of an oddity.
How to tell if a self cert mortgage is right for you
So would a self cert mortgage be right for you? Well, it depends on a number of factors.
For one thing, are you the sort of person that takes responsibility for his or her own earning power? If you're a freelancer of any kind, the answer is likely to be 'yes' - otherwise, you'd have found your way into a steady job before now. So in that case, you may well suit a self cert mortgage. But secondly, and importantly, are you more or less sure that you will be able to keep up the payments of your self cert mortgage? Of course, no-one can guarantee that they will always have work. But an honest appraisal of your accounts over the past few years will give you, at least, an indication. In addition, there are various insurances that you can take out which will guarantee some sort of income, even when there's no work, such as Mortgage Payment Protection Insurance.
"I don't usually bother with these feedback things but the service we have received has been so excellent I am making an exception! Wendy and Dawn were efficient and friendly. We were kept up to date and problems which arose were dealt with quickly and effectively. We were in a difficult situation and Wendy instantly came up with a suitable mortgage for us - she clearly knows her products inside out. Thanks to you both."
Dr & Mr Hill, Swaffham
