Self Certified Remortgages: What You Have To Know

A self certified remortgage or ‘self cert' is a fairly recent development within the mortgage market in the United Kingdom. By way of self certifying one's income to a bank or lending institution allows the individual access to borrowing that traditionally, they might not otherwise have access to.

A recent survey carried out by one of the UK's leading mortgage lender uncovered that around 13% of the British work force is in fact self employed. The self certified mortgage schemes have long been the preserve of self employed individuals however they are not exclusive to them - Many employed borrowers may also stake a claim for the need to self certify their income.

Being self employed does not of course necessarily mean that a self certification mortgage is the best solution for all borrowing requirements. On the contrary, if the individual is able to prove their income by way of audited accounts, banks statements, and tax returns and so on, then it is highly likely that they will have access to more favorable rates of interest than those offered on the self certification schemes. Where an individual is able to provide proof of their income whether this be through an accountants reference or through pay slips and P60; they will be eligible for what is known within the industry as a ‘full status' mortgage.

Self certification mortgages have traditionally been perceived by many lenders as a higher risk form of lending compared to their full status counterparts. This is evident when looking at the rates of interest offered on these schemes and the arrangement/booking fees payable to the lender on completion for their services. Naturally many lenders will take this higher risk outlook towards self cert schemes as generally speaking the individuals who apply for such mortgages will not have the same level of guarantee with regards to their income when compared with someone perhaps that is in full time employment.

The basis of a self cert mortgage/remortgage application is that no supporting documentation is required in relation to an individual's income/earnings. Generally speaking an applicant is allowed to declare their income and as long as this is considered to be a reasonable claim with relation to their occupation and circumstances; no further checks are then made. Of course any such application must meet the lender's specified lending criteria.

It must be noted that self certified mortgages/loans are not made available so that borrowers can simply falsify their earnings. This practice is actually a criminal offence as it will be considered fraudulent. These types of schemes are primarily designed to service the newly self employed however as previously mentioned, many lenders will accept such an application from an employed individual provided that they are able to justify why they need to self certify their income. These reasons may include guaranteed/non guaranteed overtime, bonuses and commission, rental income and investment income.