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Self-employed now have little choice of mortgage products

Self certification mortgages are seen as only for the self-employed but this mortgage type is useful for anyone who cannot guarantee or verify an exact income.

Seasonal workers, freelancers or perhaps company directors who don't have fixed annual salaries are all eligible for this type of mortgage. There are no checks made on your financial status, income or employment record, other than the standard credit checks, so a good credit rating is essential. While they were initially targeted at the self-employed, they were also heavily utilized by employed applicants who exaggerated their incomes in order to secure larger mortgages. All of this was possible because of the lack of documentation required to support claims of applicants, which some mortgage brokers took advantage of in order to obtain business.

Lenders seemed willing to approve mortgages to most applicants despite the absence of evidence of their declared earnings. A number of applicants had impaired credit files and small deposits, a combination that would have excluded applicants from obtaining a mortgage from most lenders. The overall effect for these homeowners is they now have mortgages secured against properties that they can't afford or have fallen into negative equity. For the genuine self-employed there will be little choice of products when buying a new home or remortgaging.

The number of self-employed mortgages has significantly fallen with many small lenders of this product closing up shop. The larger lenders have tightened the criteria for the self-employed. One measure is to cap home loans to a maximum value and reduce the income multiples to more traditional levels. Therefore self-employed applicants who were the original targets for self certification mortgages must now pay over the odds for lenders issuing this mortgage product to homeowners who should have applied for standard products.

Use of this article or exerts thereof without the prior permission of the author is unlawful and will result in prosecution, if you wish to use the article please contact info@selfcertmortgageuk.co.uk.

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