A self-certified mortgage or ‘self-certification’ was a popular way for the self-employed to obtain a mortgage pre Credit Crunch. The process was generally reliant on an applicant being truthful in their statements in respect of personal income and it was aimed at the self-employed and people with a variable and unpredictable monthly wage packet.
Unfortunately, prior to the credit crunch, this system of self certification was abused by some and resulted in unaffordable loans being granted inappropriately. In fact, the press subsequently referred to self-certified mortgages as ‘Liar Loans’. Since the Credit Crunch lenders have been nervous about offering loans to anyone that does not fall into a standard income profile and self-certification is no longer permitted.
However, in practice the self-employed still have access to the same mortgage products as employees, as long as they can now prove their income and satisfy the new rules introduced by the Financial Conduct Authority, in “The Mortgage Market Review.” This includes a variety of tests aimed at establishing general affordability of the proposed loan.
Most lenders classify someone with an ownership of more than 20-25% of a business for which they work as self-employed whether it is a limited liability company or sole trader. If you are classified as self employed then you will need to prove your income, ideally by producing audited accounts and/or proof of declared taxable income available from HMRC on a form known as SA302. In some cases up to three years previous accounts may be needed to prove a regular income, but some lenders only require 1 year. Self Employed Contractors are treated the same as employees by some banks.
As you might expect, a regular or growing turnover and profitability and a regular monthly income will help you secure a mortgage as a self-employed applicant. The SA302 is also very useful in support of your up to date and historic accounts and a fair and reasonable payment of dividends (in the case of limited companies) is generally preferred by lenders to extreme variances. At the end of the day lenders are looking to identify and reduce their lending risk and meet the obligations put upon them by the FCA to lend responsibly.
For more information or to speak to an mortgage adviser or call 01628 507477.
Recent posts
Buying a house is a big deal, and where you are planning to buy will make a difference financially. In this short blog, we look at the most affordable and most expensive areas and how much you need to be earning to buy in there.
Pros and Cons of Equity Release
10 days ago
Equity release is a type of mortgage that allows homeowners 55 and over to access money from their property's equity without having to leave their home. This is done by securing a loan against the house which is usually repaid by selling the property when the borrower passes away or has to move into long-term care.
Your House Viewing Checklist
11 days ago
It’s important to ask questions about the property you are interested in before taking that step to make an offer. A little probing can make all the difference between buying your dream house or something that requires a lot of work.
Half of over 60s predicted to benefit from accessing housing wealth through Equity Release
14 days ago
There are millions of homeowners over the age of 60 who are likely to release money from their homes to pay for their lifestyle during retirement giving those who are 'asset rich but cash poor' a way to live out their retirement the way they wish.
Average Age of the First Time Buyer in the UK
21 days ago
The average age of a first-time buyer in the UK is two years older than 10 years ago. This is understandable with managing the cost-of-living and challenges within the economy such as high interest rates making it difficult to get onto the property ladder.
Delayed Start Mortgage from Skipton
23 days ago
Skipton Building Society launches ‘Delayed Start’ mortgage meaning first time buyers won’t be required to make repayments for the first three months.
According to a survey by Skipton, first time buyers who bought their home in the last five years found that in the first three months of living there, they were spending upwards of £30,000.
Gardening Tips for Beginners
28 days ago
If you have recently moved into a property with a garden that requires a little TLC, or you’d like to get on top of your current green space, check out our tips.
The Family-Backed Mortgage from NatWest
29 Apr 2025
High street lender, NatWest, have launched a new product to help first-time buyers purchase a property with assistance from a family member or friend to get them on the property ladder sooner.
More information
Trusted by
