In a traditional mortgage deal, the lender checks the salary of the buyer to work out his annual income, and then lends a multiple of the annual income. If the buyer has an adverse credit history, poor credit rating or is a self-employed person with limited proof of income, he can find it difficult to get a traditional mortgage. For some people, their monthly income might come from different sources, such as commission or bonuses, where it is also difficult to provide evidence of a steady monthly income. Self-certified mortgages are specifically designed to cater to the needs of people who have some savings for a deposit, but do not have sufficient proof of the money coming into their accounts. Because of the risk involved for the lender, these deals tend to have higher interest rates and lower loan-to-value ratio than other mortgages.
In a self-certified mortgage scheme, the buyer provides a signed declaration of income and his ability to afford the mortgage. Their accounts are not checked and employment status is not considered. But the buyer will undergo a standard credit check and must provide proof of identity.
An established misconception is that self-certified mortgages are only for the self-employed, while they are, in fact, applicable to a wide range of people, including those whose earnings are mostly in the form of commissions, those with more than one part-time job, people earning from investments or pensions, freelancers or contractors, and unsalaried company directors, for example.
One specific advantage of certain self-certified mortgages is that they can be moved from one property to other. This gives greater flexibility, but as the risks are higher for the lender, your charges will be higher too. So it's best to take guidance from an independent mortgage adviser before going directly to a lender for this type of loan.
Although some high street lenders provide self-certified mortgages, specialist lenders can offer a much bigger choice of schemes. Some of these specialists prefer to deal with a broker instead of dealing with the client directly. The mortgage deal is generally more complex than regular mortgages, so it is always wise to take advice from a specialist independent mortgage adviser or a mortgage broker. There are often some restrictions in these policies, such as having to buy compulsory insurance from the lender or higher redemption fees, which the broker will be able to explain to you.
Author Jamil Khaliddate added 2009-08-25 15:14:54