Content Writer
Mortgage Advisor & Director
If you’re self-employed, or have a less stable income, you might be wondering whether self-cert mortgages are an option. In this article, we explain why they are no longer available, what alternatives you may have, and how we can help.
What is a self-cert mortgage?
A self-cert mortgage, also known as a self-certified, or self-certification mortgage, was a product aimed predominantly at homebuyers who found it difficult to prove their income, such as the self-employed individuals.
They allowed applicants to declare or ‘self-certify’ their earnings, without any need to evidence their income. While they were helpful to many people with complex income, they were also vulnerable to abuse. Sadly, they resulted in a significant number of people borrowing more than they could afford, which led to the repossession of many homes.
Are they still available?
Self-cert mortgages were banned in the UK by the Financial Conduct Authority (FCA) in 2009. They introduced the ‘Responsible Lending Guidelines’, at this time, which require mortgage lenders to complete an evidence-based affordability assessment before approving mortgage applications.
From 2009, all lenders have, therefore, required proof of income as part of the mortgage application process. The specific requirements vary by lender, and depending on the type of employment you carry out, but may include:
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Payslips
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Company accounts
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1-3 years of certified accounts
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SA302 year-end tax calculations
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Proof of Existing contracts and/or profit projections
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Proof of dividend payments
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Proof of pension income
Are self-cert mortgages coming back?
No, they‘re not, and it’s incredibly unlikely that the equivalent of a new self-cert mortgage will be seen in the future. It’s widely believed that the irresponsible lending practices surrounding self-cert mortgages contributed to the 2008 financial crisis. A similar product would, therefore, carry high risk of a repeat scenario that the FCA would be keen to avoid.
How we can help you get a mortgage with no proof of income
While you will need at least some proof of income to get a residential mortgage, our brokers have a strong track record helping self-employed individuals get on the property ladder with less than one year’s accounts at the time they contacted us.
Our mortgage advisers have the right knowledge, experience and lender contacts to help you find flexible mortgage options and deals similar to the self cert mortgages of old.
You can book a free, no-obligation chat with one of our mortgage brokers below or read on to find out more about the self cert mortgage alternatives that are available:
Explore your mortgage options with an expert
What is the closest alternative to a self-cert mortgage?
When self-cert mortgages were available, they were often the only option for self-employed applicants and those with fluctuating income. However, since then, mortgage lenders have realised that they need to adapt their criteria to accommodate the more than 4 million people in the UK who have a self-employed income, so alternatives to self cert do exist.
Flexible self-employed mortgages
There are now far more mortgage products available, and self-employed applicants have access to the vast majority of them, so long as they are able to prove their income.
While it can be more challenging to provide substantial evidence of your income if you’re a limited company director, contractor, self-employed applicant, or rely on commission-based income, it’s perfectly possible with the right lender.
Lender criteria varies widely from one to the next, and some are more flexible to the needs of the self-employed than others. For example, certain lenders allow borrowers to begin their application after just 9 months of trading, with a view to completing after 12 months of trading. This is often more possible if you’re in a professional career, such as a doctor.
High net worth mortgages
If you’re a high-net-worth individual, it may not be necessary to prove your income, as you may be able to provide evidence of savings, or assets in support of your mortgage application. These mortgages are often provided by private mortgage lenders, who may be happy for certain borrowers to apply for their mortgage in a similar manner to self cert.
To qualify for high net worth exemption, you will need an annual net income of at least £300,000 or assets worth £3 million or more.
Investment mortgages
Commercial mortgages are not regulated, so they can also be easier to obtain than a residential mortgage. Likewise, buy-to-let mortgages tend to be based on the potential rental income, rather than employed earnings. While some lenders require a backup form of personal income, not all do, so evidence won’t always be necessary.
Whatever your mortgage needs, if your income is non-standard, it’s usually helpful to use a mortgage broker. We can match your circumstances to those lenders who are able to make best use of your specific income type.
How to renew an existing self-cert mortgage
If you’re still repaying a self cert mortgage that was taken out prior to 2009, you won’t be able to renew it on self cert terms. However, even if your income type hasn't changed, you will likely have built up a substantial level of equity in your home since you bought it.
This is almost certain to make remortgaging onto another product much easier, as the LTV (loan to value) of your borrowing will have significantly reduced, meaning the loan you’ll need to qualify for should be much lower. You may also benefit from lower rates, as self-cert mortgages typically had inflated interest rates due to the inherent risk.
What to do if you think you were mis-sold a self cert mortgage
If you have been mis-sold a self cert mortgage, you may be entitled to compensation, even if the firm no longer exists. The Financial Service Compensation Scheme (FSCS) will assess your claim and decide whether the company that sold your mortgage acted appropriately.
Why choose Teito for your self-employed mortgage?
It can be daunting to meet the income requirements needed by many lenders when you’re self-employed, but it’s much more possible than you think, so long as you approach the right lender for your circumstances.
As a whole of market brokers, we can help you to find a lender with the right level of flexibility to meet your needs. It’s no longer necessary to look at self certification, as there are usually niche lenders available to you, no matter how your income is earned.
Reach out today to arrange your initial consultation for free with one of our 5-star rated mortgage experts.
FAQs
While UK self cert mortgages no longer exist, it may still be possible to get self cert mortgages from an overseas lender. In countries such as the Czech Republic, for example, privately funded mortgage lenders are able to circumvent the laws set out by the FCA to provide this type of product. However, the FCA strongly warns against this form of borrowing, given the serious risk involved to borrowers. There is no financial recourse available to those who risk European self cert mortgages.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.