With self cert no longer available, what are my options?

Mortgage lenders insist on checking applicants income by assessing P60's, employer references and, for those who are self employed, typically three years audited accounts.

For those earning income in any way other than routine employment, this need to check earnings has limited how much could be borrowed, or even whether an applicant may or may not qualify for a mortgage.

During the previous decade what were known as self certification mortgages were widely available.
These products allowed those who were self employed and contractors borrow mortgage funds based on a declaration of their earnings. True self certification meant the lender did not undertake any check of the income figure stated on the application by means of referencing or income documentation. In other words the borrower stated their income and the lender took their word for it.

Self certification or non status mortgages came under increased scrutiny following the onset of the global financial crash in 2008. Analysis indicated such products were being abused. It emerged a significant number of applicants were inflating their income in order to borrow larger amounts.

The regulator subsequently banned self certification mortgages in the UK in 2011 because of concerns that borrowers were being granted mortgages they could not afford. Lenders now have to undertake stringent checks to ensure that borrowers will be able to repay their mortgages. FCA rules mean that lenders must always run detailed affordability checks with every mortgage application. Proof of income and affordability is  because the regulations state that lenders "must not accept self-certification of income".

Alternatives to self cert

If you are self-employed you may feel as though lenders have turned their backs on you since self cert mortgages were banned.  The message for the self-employed is that there are mortgages out there for you, it's not a lost cause.  Happily there are specialist lenders operating in the marketplace who understand the needs of self-employed borrowers. Where appropriate, they will take factors such as spouse's income and directors' pension contributions into account. They underwrite each case on an individual basis and can lend on one year's accounts

Some specialist lenders will take into account net profit and things you can claim against tax such as using a room in your house as an office and payments into a pension plan. For limited companies they will look at director remuneration including pension payments, dividends and any company car. For partnerships they will look at share of profit and for sole traders, net profit. If the borrower is a contractor they will look at the contract and use the daily or weekly rate.
In some cases lenders accept either an SA302 or a Tax Calculation, both of which must be accompanied by a Tax Year Overview.

The benefits of a broker

People who work for themselves will often encounter issues getting a mortgage with a high street bank and will generally need to approach a specialist lender.

Going to a broker is a quick process as they have access to six or so specialist lenders, some of which only distribute their products via brokers. A broker will advise you on what your options are and place your application with lenders more likely to welcome you as a borrower.
So if you are a first time buyer, moving house, remortgaging, the mortgage you require may be more accessible than you think, providing you can genuinely afford the repayments. Simply contact us for a FREE no obligation mortgage quote.