Self Certification Mortgage

self certification lending

No Income Declaration Loan

 

This type of mortgage has now been removed and is not currently available to the UK lending market, however below explains what the product was.

Also know as a self certification mortgage or non status mortgage. This is where a mortgage will be taken out on the basis that there will be no proof of income or only a limited amount of proof required by the lender. The concern with this is that income may be over inflated to achieve a higher loan.

The self cert lenders have potentially found though that there have been no more repossessions with this type of lending than with full status lending. Self cert is not an excuse to inflate income to achieve a loan as the loan must be serviced comfortably within the realistic standard income multiples.

An example of self cert is where a person has various sources of income that may wildly fluctuate over time or are not guaranteed to be permanent so proof is very hard to obtain. This potentially may be typical of a self employed person.

Often what is stated as their net profit is not a reflection of their true earning, as many costs and expenses will be lost in the accounts and offset with the business, so in actual fact they are far wealthier than first appear. The lender may ask their accountant to be chartered or certified and to state that in their option the borrower can service the loan and has been trading a certain amount of time as stated on the application form and they are in the type of industry or service as stated.

Self cert can also be applicable to employed people as they again may find it hard to proof their real income for example they may receive a bonus or work a lot of over time or earn a lot of commission that can fluctuate. Caution should be taken when borrowing using forms of income that are not reliable or guaranteed. For if such forms of income where to stop payments may become difficult to service.

Lenders will often do spot checks on true self cert cases and gauge the stated income for the type of job against what is realistically expected to be earned This is responsible lending practice.