Why A Self Certified Mortgage Is Not Always The Only Option?

Although self cert mortgages in the residential mortgage market are no longer available, we still get daily enquiries for them. Usually the enquiry comes in a familiar format and depending on the type of enquiry depends on whether a new mortgage deal would be available.

I’m self-employed, can I self-certify my income?
We have numerous enquiries where people who are self-employed and used to have a self-certification mortgage feel that this is the only way for them to obtain a mortgage. This is untrue. If you are self-employed and have a provable income from any of the following sources then a residential mortgage, subject to a clean credit file and passing the lender’s credit score, should be available to you.

Lenders will consider your income from a variety of sources which include:

PAYE – Your salary
Your share of net profit
Your income as declared on your self-assessment form, also known as an SA302
Government benefits and allowances
Pension income
Investment income
Rental income
HMRC pounds

Buy to Let, Self-Certified mortgage?
Self cert buy to let mortgages are still available to clients that have no provable income due to reasons such as less than 12 months trading, or maybe you are a housewife / house husband and you own the house for tax reasons to minimise the income tax payable. Or, maybe you are self-employed and have not made a profit in the last 12 months although you have retained profits and a good reason for the decline in profits for the current year that a lender may take a sympathetic view on.

The number of lenders in this market place is limited although mortgages are available. As a point of interest, a buy to let mortgage loan is usually granted based on the size of the deposit and the achievable rental income the property would receive – it is NOT based on personal income although some lenders may want to see a provable minimum income. Therefore, if you are after a self cert buy to let mortgage you have options. If your self-employed provable income is £25,000 you could still obtain, for example, a £250,000 buy to let mortgage subject to fitting the lenders other mortgage criteria.

Self-employed with cash income?
cash in hand

This type of mortgage where your income is not declared to the tax man is not available. We don’t envisage self cert mortgages in the residential market place ever returning. Even lenders and brokers that offer ‘fast track’ mortgages are slowly disappearing from the market. For those of you that are self-employed the days of declaring a minimal income to the tax man whilst trying to obtain a maximum mortgage amount based on achievable income are long gone.

Can you still get self cert mortgages?
Unfortunately, not – this type of mortgage was removed from the market place at the time of the financial crash back in 2008 as this was seen as the root cause for the widespread crash that the housing and mortgage market experienced.

How many years do you have to be self-employed to get a mortgage?
This depends on the lender and the longer you have been self-employed the larger the selection of lenders that can be approached. The minimum time for self-employment would be 12 months with one years of accounts for a lender to consider giving you a mortgage.

Can you get a mortgage without proof of income?
No you can’t unless the income you are referring to is pension, investment, benefit or rental income. However, even these income sources are provable in one form or another and the lender will need to see this proof in order to use the income for mortgage calculations.

Alternatives to self cert mortgages
The alternatives are to find a lender that will consider the income that you have disclosed. As mentioned previously this could be your PAYE income which may be on the low side due to advice from your accountant, and can include your dividends, maybe your retained profit from a previous year of trading.

Is it hard for the self-employed to get a mortgage?
It is no harder to get a mortgage whilst you are self employed compared to being employed unless you have only just started trading. A mortgage lender would require you to be self employed for at least 12 months with at least one year’s accounts before they would consider lending to you.

FAQ Board

Is a self-certification mortgage possible?
For residential mortgages they are not possible. For a buy to let mortgage a variation of self cert may be possible in the sense that not all mortgage lenders need you to have an income to qualify for a loan.

Self cert brokers – Do they exist?
You may find a broker advertising their services for a UK self cert mortgage. The truth is there are no legitimate brokers out there that will offer this type of mortgage to you anymore as they simply don’t exist. Our aim is to provide you with the alternative options available to you and hopefully this guide has achieved that.

Self-certification mortgage lenders?
In today’s financial environment you will not find any true lenders offering this type of mortgage deal as lenders are now bound by much stricter lending rules and regulations which include checking an applicants perceived affordability of any new mortgage deal – This ultimately comes down to proving your income which is in direct contract to what a self cert mortgage was designed to overcome.

Are true self cert mortgages available? NO
Can I get a mortgage with other forms of self-employed income? YES
Can cash income be used for a mortgage if declared? YES
Can cash income be used for a mortgage if not declared? NO

Published on 12 April 2020

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