Are Self-Cert Mortgages Still Available?
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What are self-cert mortgages?
You may have heard self-cert mortgages referred to as self-certification mortgages or self-certified mortgages, however, the fact that they are still queried fairly often is surprising, given that they were removed from the market over a decade ago.
Self-cert mortgages were available in the UK prior to 2009, when they were banned by the Financial Conduct Authority. They were predominantly used by those individuals who found it difficult to prove their income, such as self-employed mortgage applicants.
Unlike traditional mortgages, self-cert products allowed for applicants to declare their own income, without providing any evidence of that declaration. Although this often meant that the interest rates attached were significantly higher than standard mortgage rates.
Why aren’t they available now?
The Financial Conduct Authority took the decision to ban this type of mortgage due to frequent misuse of the self-declaration facility and unethical lending practices associated.
Since the ban, the Financial Conduct Authority brought out the ‘Responsible Lending Guidelines’ which puts the onus on all lenders to ensure that all mortgage applicants are able to prove their income.
Did self-cert mortgages lead to the credit crunch in 2008?
Whilst self-cert mortgages didn’t single handedly cause the credit crunch, they certainly played a role in the overall financial crisis in the UK.
Getting a self-cert mortgage overseas
Worryingly, there are still lenders offering self-cert mortgages outside of the UK, where the Financial Conduct Authority has no bearing on the rules and regulations.
Why is it not advisable to obtain a self-cert mortgage?
Given that you are not protected by any UK financial regulations or laws, borrowers are strongly discouraged from considering an overseas self-cert mortgage. This puts you at risk of serious financial loss, and would render you vulnerable to mis-selling practices.
What are the alternatives?
There are plenty of options available to self-employed borrowers with UK lenders, which are authorised and regulated by the Financial Conduct Authority. This means that you would benefit from strict lender guidelines and financial protection.
Most UK mortgage products are available to both employed and self-employed applicants nowadays and so long as you are able to provide proof of income, you should have no more difficulty than any other applicant.
Whatever your self-employment style, we should be able to find a Mortgage Lender to suit your circumstances. The below forms of income can all be used to secure a mortgage offer:
- Rental income
- Freelance income
- Personal salary and dividends
- Share of net profit
- Investment income
- Pension income
Speak to The Mortgage Mum
Here at The Mortgage Mum, we specialise in helping self-employed applicants to prepare for and find the ideal mortgage product for their circumstances. Our access to a wide selection of products from across the market allows us to source a lender who will accept your employment type and income.
Whether you are looking for mortgage advice or full support throughout your application from our friendly mortgage brokers, we’re here to simplify the process.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.