Self Cert Mortgage: An Overview

2007-03-08 10:33:40

( Financial )



The first thing that a loan provider or a bank will ask you when you apply for a loan, especially a home loan, will be a proof of your employment and income. The documents that will usually be asked to prove that you are earning what you said you are earning are pay slips, income tax return, or certificate of employment.

However, not everyone can easily furnish proof of earnings. Overseas contract workers, freelancers, self-employed, commissions-based employees, and those who recently operated a business will find it very difficult to provide documents that would verify their take-home pay.

Fortunately for home-based workers, self-employed, or commissions-dependent employees, financial institutions and loan providers have become more lenient nowadays. If you are a freelancer like me, or have just newly set up your own company, you won’t find it hard to get a self cert mortgage.

Overview of self cert mortgage

A self cert mortgage, commonly known as self certified mortgage, is a type of home loan that was originally created for self-employed individuals who do not have any means to provide evidence of employment or earnings. Instead of requiring borrowers to submit documents showing their monthly income, such as pay slips, lenders of self certification mortgages would only ask for borrowers’ own declaration of income.

Since self certification mortgages are high-risk investments, many loan providers still conduct credit and background checks of borrowers. Such checks will help creditors know if the applicants of self-certification mortgages have a history of default payments or fraud.

Drawbacks of self cert mortgages

The interest rates applied to self certification mortgages are usually higher than other types of secured home loans. However, since competition in the lending industry is growing, I believe you can find a self certified mortgage provider that will give you competitive interest rates. You only have to be patient in shopping around for the most acceptable interest rate for you.

Lenders of self certification mortgages usually ask borrowers to deposit a substantial fraction or percentage of the loan amount. So you won’t really be able to get the self certified mortgage loan if you are unable to meet the required amount of deposit. I guess it is best for you to save a significant amount of money first before applying for a self certified mortgage.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.