Self-certification mortgages are intended for borrowers who cannot prove their income. Historically, persons who could not provide the necessary documentation were either offered a mortgage that was not large enough or were refused.
Persons who get bonuses and commissions, those who work on contract or are self-employed can apply for a self-certification mortgage. Generally, applicants are not required to prove their income but can state the amount they are likely to get. To back up their application, borrowers may be required to present a bank statement.
A major advantage of obtaining a self-certification mortgage loan is that it is available to persons who cannot qualify for a standard mortgage loan. Some borrowers are unwilling to present proof of income while others cannot do so.
Seasonal workers do not have stable income throughout the year and fall in this category. They may not qualify for a standard mortgage even if they can afford to make payments. In this case, it is a good idea to apply for a self-certification mortgage because borrowers are only required to sign a declaration stating that they will make payments toward their mortgage. This is valid for sole traders, freelance contractors, and other professionals who are self-employed. Some of them have a higher income than their salaried colleagues, but they may be unable to prove it.
Self-certification mortgages are a good choice for other categories of workers as well. Employed persons who have more than one source of income, for example, those with several part-time jobs or part-time businesses can apply for a self-certification mortgage. Another category form those whose income is from investments or pensions. Workers whose annual bonus represents a substantial portion of their income and those paid on commission are also likely candidates. Unsalaried company directors as well as agency and temp staff whose income cannot be predicted and varies are yet another category.
Financial establishments that feature this type of mortgage take more risk and offer higher interest rates. Borrowers who apply for a self-certification mortgage should pay a larger deposit. The good news is that if the applicant puts down 25 percent, financial institutions may offer a better interest rate. Thus, mortgage payments are affordable.
There are many financial institutions to check with, if you are looking for a self-certification mortgage, including ING Direct UK, Barclays, Lloyds, Abbey Bank, First Direct, etc. Given that self-certification mortgages are a special type of product, not all financial institutions offer them. Many of these financial establishments prefer to work with and offer their products through independent brokers.
Borrowers can look into different types of self-certification mortgages. Among them are variable rate mortgages, tracker mortgages, fixed rate mortgages, and capped rate mortgages.