What Are Self Certification Mortgages?

If you are self-employed as a contractor or agency worker, you may find getting a mortgage loan to purchase a house very difficult. The current state of the global economy and the banking system has caused banks to be more selective in whom they give loans to.

Lenders are being very critical about whom they grant mortgage loans to, and even if you have a steady track record of paying your bills, previous mortgages or rent, you may still have a hard time showing a potential lender that your income level is steady enough to allow them to grant you a mortgage. When this happens you should consider looking into a self certification mortgage.

 

Self certification mortgages allow a borrower to qualify for a mortgage loan without having to prove your income in the traditional way of showing pay slips or employment contracts. You simply fill out the application and demonstrate to the lender that you have had enough earnings in the past to cover all of your bills and then some. If the lender feels that the proof is enough to show that you can keep up the same level of repayment into the future for a mortgage and your other financial commitments, they will grant you a mortgage loan. This type of mortgage is also handy for people who do seasonal work or when overtime, bonuses and commissions make up a large part of their income.

Additionally this type of mortgage is also worth considering if your income comes from something other than a steady paycheck. If you have, for example, an investment portfolio that generates a monthly income for you, you can use a self-certification mortgage to get your home. This type of mortgage can be used by people who have a traditional wage earning, as it allows them to borrow a larger amount of money because the salary is the biggest factor in the loan consideration process.

The big thing to remember about self certification mortgages is that you are providing the lender evidence of your past earnings to show them that you are bringing in a steady income and certifying your belief that you can continue to make this much money to support your mortgage. To help you qualify and receive the mortgage, you can submit letters from past employers or from your accountant that state what you have earned. This helps the lender process the application quicker. If you have other mortgage or rental contracts that were in satisfactory condition, you can use these as well to help plead your case.

Plan on having to put down a significant deposit on your new home so that there is equity in the home from the start. If you have had a previous, successful mortgage, you may only need about 5% of the purchase price as a down payment. You should plan to put down 15% in order to get better repayment terms and interest rates . You should definitely shop around and compare the many different self certification mortgages that are on the market, and you may wish to consider a mortgage broker that specialises in self certification mortgages to help you find the right one for your needs.





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