Do self-certification (‘self-cert’) mortgages still exist?
No. The Mortgage Market Review (MMR) of 2014 has changed how lenders must deal with mortgage applications from self-employed people, and ‘self-cert’ deals are no longer available.
Self-employed people must apply for the same mortgage products as everyone else, and in order to obtain a loan, self-employed mortgage applicants need to pass their chosen lender’s affordability tests in the same way as any other borrower.
This means that self-employed people must provide far more evidence of their incomes than they used to. If you’re self-employed and are thinking of applying for a mortgage, expect your lender to request at least two years’ worth of business accounts.
Lenders prefer mortgage applicants to provide accounts that have been prepared by qualified accountants, and are likely to make a decision on whether to lend to you based on the average profit you have earned over the past few years.
If you’re unable to provide accounts that go back as far as two years, it might be challenging for you to convince a lender that you can afford to repay a mortgage. However, having evidence that you’ve got regular work or providing proof of future commissions may help.
Do self-employed people have to pay higher mortgage rates?
Not necessarily. If you’re able to provide your chosen lender with enough information about your income, it’s possible that as a self-employed person you will qualify for the same mortgage deal as a person with a permanent, full-time job.
However, if you search for a mortgage via a broker who has reason to believe you might not get a mortgage from a mainstream bank or building society, you might be advised to try applying for a mortgage from a specialist lender who deals frequently with self-employed borrowers.
In this instance, you are likely to face higher than average mortgage rates, and may also need to stump up a larger deposit on whatever property you are buying - usually at least 20%.
As a self-employed person, how should I go about finding the best mortgage deal?
Many self-employed people choose to consult not only an accountant but also a mortgage broker when trying to find a deal to suit their needs. This is because a broker is likely to have specialist knowledge of which banks and building societies are more willing to lend to self-employed people, which have the strictest lending criteria and which are most likely to offer a competitive interest rate to a self-employed borrower.
However, there is no rule that says you must use a mortgage broker because you are self-employed.
If you’ve been in business a long time, have healthy accounts and are confident that you can afford the mortgage you’re applying for, you may well choose to go it alone.
In that case, using price comparison tools such as the mortgage comparison tables available through MoneySuperMarket’s mortgage channel is a good way to start looking for the right loan.