The benefits and risks of a UK self certification mortgage

A UK self certification mortgage (or self-cert mortgage) is ideal for a UK contract worker or part time worker who has unpredictable earnings compared to a salaried employee. The lender will ask for details of the borrower’s earnings but no proof of income is required. Other terms of a UK self certification mortgage will depend upon the lender’s requirement at the time, and in accord with the interest rates prevailing in the market.

benefits

You can nominate your private earnings without needing to show proof, such as business accounts. 

If you expect your income to rise in the near future, and are confident that you can maintain the monthly mortgage payments, you may be able to acquire a better property than your provable earnings would allow, based on the typical income- multiples that lenders use for salaried employees.

risks

If you over estimate your income or your business does not achieve the estimated revenues and profits in the following years, you may not be able to maintain your self-cert mortgage repayments, and your home will be at risk.

If you deliberately over estimate your income to obtain a UK self certification mortgage for a more expensive property you should be aware that this is illegal. It is also a high risk strategy and will backfire on you should the economy and interest rates turn against you.

With a UK self certification mortgage you are unlikely to get more than 75% of the property price advanced from a lender (simply because of the higher risks involved) therefore you need to be able to finance the remaining 25% from other sources.

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