Self certification mortgages were originally designed for the self employed who were unable to prove their income and these were ideal for those who had irregular or unreliable incomes. At the height of the property boom, other borrowers were also taking advantage of self cert mortgages and in some cases, these borrowers may have overstretched themselves.
Now, there are only a handful of mortgage lenders still offering such products as lenders worry that borrowers unable to prove their income are too risky in the current economic climate. Even these lenders have tightened criteria and increased the cost of their handling fees. Self certification mortgages are covered in the CeMAP exam but is it a possibility they are actually a dying product soon to be a thing of the past?
Those experiencing self employment for the first time could find it difficult to obtain a mortgage if they cannot provide either three years’ accounts or lack strong profits as they will not qualify or a normal mortgage either.
In the past, those applying for self certification mortgages have over-inflated their income to gain a larger home loan and many are now struggling to meet their monthly payments.
Tony Harris, IFA at ContractorMoney, said: “The FSA is increasingly clamping down on mortgage brokers who have knowingly inflated clients incomes on mortgage applications. Similarly the lenders are under increasing pressure to be seen to be acting prudently with regard to their lending and self certification of income is beginning to look like a product that has had its day.”