Self Certified Mortgages: Are They Still Available?

For many years, self-cert mortgages offered a convenient way to buy a home for the self-employed and anyone else who had difficulty proving their income. Though these mortgages no longer exist, alternatives are available for people in this position.

This guide will explain how they worked, what you can do if you have one and who to speak to for any advice or guidance.

What is a self-cert mortgage?

Self-cert mortgages, more formally known as self-certified or self-certification mortgages, were a type of homebuyer loan that didn’t require proof of income. An applicant would simply declare their earnings without evidence.

In other words, the applicant would ‘self-certify’ their ability to repay their own mortgage.

Self-cert mortgages were designed for people with an income that is irregular or difficult to prove, such as self-employed, freelancers, contractors, and directors of limited companies. At the time, they were the only way people in these types of professions could get a mortgage.

Though they’re no longer available, there are now far more options. If you’re in a similar profession, a broker with experience helping people in such circumstances would be able to outline what they are and how you can get the mortgage you need.

Why self-cert mortgages are no longer available

Mortgage lenders are overseen by the Financial Conduct Authority (FCA), a regulator that protects the interests of consumers of most financial products, such as banking services, pensions, investments and, of course, mortgages.

The FCA felt that self-cert mortgages were unfair to consumers, as they made it too easy for applicants to get a loan they couldn’t afford, leading to financial trouble. It’s thought that self-cert mortgages contributed to the 2007-8 financial crisis, when many people lost their homes.

So, the FCA ruled that the responsibility for judging whether an applicant can afford their mortgage repayments should lie with the lender, not with the applicant themselves. Responsible lending guidelines were introduced, requiring lenders to carry out an evidence-based affordability assessment before approving a mortgage application.

Alternatives to self-cert mortgages

Though you may not meet the affordability criteria for many mainstream lenders, there’s no need to be discouraged. A minority of lenders provide niche mortgages that could be considered alternatives to self-cert mortgages and could be perfect for you. These include:

• Self-employed mortgages. These are not a specific type of product but there are lenders who specialise in helping the self-employed get the home loan they need
• Company director mortgages. These might be suitable if you have retained profits within your business and want to find lenders who will include them as part of their eligibility criteria
• Low-income mortgages. These might be suitable if you can provide evidence of income at a low level over several years.
• Buy-to-let mortgages. These might be suitable if you’d like to invest in property and are not looking for a home to live in. They do not always require evidence of employed income if you intend to cover the repayments through rental income.
• Guarantor mortgages. These might be suitable if you have a family member willing to use their earnings and/or home as security to guarantee your loan.

Proving your income if you’re self-employed

Since self-cert mortgages were banned in 2009, you cannot get a mortgage without proof of income in the UK. Most applicants prove their income by providing payslips from their employer. Freelancers, self-employed people, contractors, and company directors can supply two alternatives:

• Full company accounts (directors)
• 2-3 years certified accounts (sole traders / partnerships)
• SA302 year-end tax calculations (i.e. your tax return)

They may also ask for other evidence, such as contracts with current clients, profit projections (if you have less than 3 years accounts) or details of dividends payments you’ve taken from your company. Providing this documentation could be a problem if:

• You’ve been operating for less than three years
• You’ve made a loss in one of the last three years
• Your income has been very inconsistent
• Your profits have been decreasing

If you can’t supply evidence dating back this far, or if doing so would present your finances in a negative light, it’s risky to apply directly to a lender for a mortgage. Many will automatically decline your application without this paperwork.

The shrewd move is to seek the help of a specialist broker first. They’ll be able to help you identify lenders who will look more favourably on your application and avoid unnecessary rejections which could result in a black mark on your credit score.

How to find the right mortgage

As a self-employed person or business owner, it’s crucial to find a lender who understands the nuances of your income and can fairly assess what you can afford based on the evidence you’re able to provide.

This is a difficult task, so it’s best done with the help of an experienced broker, who will:

• Work with you to understand the exact nature of your business and income
• Offer advice on the best way to present your case
• Identify which lenders offer mortgages for people with limited proof of earnings
• Seek out deals that may not be available if you apply directly
• Tell you exactly which paperwork you need to apply for the mortgage you want
• Aim to find the best possible rate for someone in your position

Not all brokers have experience with self-employed mortgages, and you’ll want to work with one who does. You may also have other requirements, such as a broker who specialises in bad credit mortgages or low deposit mortgages.

It’s surprisingly easy to find a broker with the exact experience you need to deal with your case. Through our free broker matching service, we’ll introduce you to one of many brokers we’ve trained and vetted, based on their compatibility with your situation.

Call us now on 0808 189 0463 or make an enquiry so we can schedule a free, no-obligation chat with a broker we’ve selected for you.