Self Certification Mortgages: An Alternative To Obtaining Funds

2007-03-08 10:33:40

( Financial )



A self certification mortgage also known as a non status mortgage, or self employed mortgage, is suitable for people who are self employed, and have no means of providing any proof of income. A lender of self certification mortgages will check your credit score; run a credit check and request for a number of financial references in place of the provision of pay slips. Lenders will also ask you to sign a declaration that you have the ability to make repayments on your mortgage. Additionally, some lenders will require you to put a certain percentage of the value of your home when you apply for self certified mortgages.

Aside from the self employed, self certified mortgages are also suitable for contract workers, workers who earn a high bonus, freelance employees, part-time or short-term contractual employees and those who earn more than one income.

All types of mortgages can become self certification mortgages: fixed and variable interest mortgages, capped, discount mortgages, and others.

Because of the high risks and costs involved with self certification mortgages, interest rates tend to be higher compared to other mortgages; however, these interest rates could be lowered if one is able to show a good credit history, a regular source of income, provide a larger amount of funds in a bank account, and/or prove that although there was an irregular stream of income being deposited, that one had consistent earnings.

There are self employed mortgages that can be paid early or in lump sums. There are also those that are lenient, and also allow you to make underpayments and/or waive any late payment penalties.

Obtaining a self certification mortgage requires serious thought. If you have provided your property as a security to your loan, then you must ensure that payments are regularly met, or you can risk losing your home. It is also strongly advised that you borrow only what you can afford to pay, as borrowing higher amounts could lead to great financial problems in the future especially when interest rates rise. You also should not provide any misleading income information, as this can lead to a criminal record.

A mortgage broker can assist you in searching for the best self certification mortgage with the best interest rates available. A mortgage broker can also provide you more information and advise on whether applying for a self employed mortgage would be a wise decision, or whether there are other options that can be made available for you.


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