If You Have Irregular Income, Try Self-certification Mortgage

If You Have Irregular Income, Try Self-certification Mortgage

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Self Certification Mortgages were introduced a decade ago to help prospective home buyers who have funds for property investment but cannot demonstrate their true earnings or cannot verify their income. Standard mortgages are granted on the basis of a fixed income, such as from a full-time job or steady income from other established engagements or businesses.

However, for many of the self-employed, the income is unpredictable, the money arriving at irregular periods, probably taking weeks or months. Lenders are weary of such customers because of a lack of surety of regular repayments or any repayment at all. In such cases, self-certification mortgages can come to the rescue of the self-employed with irregular income. Many lenders even offer an option where you can defer payments until your own invoices are paid.

Self Cert Mortgages are designed for self employed persons or people whose income is difficult to assess. These clients include those who work when there is demand for their services, salespersons who earns different amounts every month or someone with no accounting records due to the seasonal nature of their work. This is possible because self-certified mortgages are designed to approve your application on what you expect to earn, as opposed to physical proof. Before approaching any lender for the loan, it is useful to consult an independent mortgage broker to determine whether self-cert mortgage is the best option for you and if so which option to choose.

However, lenders need some kind of proof of what your average income will be. This could be via an accountant if you have one, or invoices and bank statements for the last three years. The lenders decide on the amount you can borrow depending on the income you have declared. You can expect to get about 80% of your property value. Although the declaration does not require any document as proof, it might necessitate some proof of income in the form of credit checks undertaken by your lender, bank statements or references. For example, you may have to submit a statement on any existing mortgages or references from someone such as your landlord.

However, you will need to be aware that a self-certification mortgage has certain drawbacks when compared to a normal mortgage because it usually involves a higher interest rate. This is because the lenders perceive you as being a potentially risky customer. Since it is a risky business, self-certification mortgages are unpopular with most lenders and so only a few players are operating in this field at present. Another thing you may find as a big problem is the unusually high deposit the lenders might require from you. This can go up to 25% of the house you are going to buy much more than the usual 5% on a normal mortgage.

It is important to take some time and check the mortgage market thoroughly before settling on a deal. You may also want to check a number of online lenders offering a range of competitive self-certification mortgage deals.

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