Lending company and bank managers could be the most guarantee-conscious individuals that you will probably meet. Show up in their office without credentials and good credit history inquiring about loan and you can kiss your hopes for approval goodbye. Nevertheless, there are already borrowing opportunities for individuals whose earning capacities do not fall within the common model.
If you are your own boss and do not receive a regular stipend, then you can apply for a self-certified mortgage. Stiff competition has rendered the mortgage industry to become more flexible as they are aware that there is an emerging market for entrepreneurs under this category. Before, this type of mortgage can be offered only by special lenders with very stringent stipulations, now a lot of self-certs are offered by major financial institutions and property groups.
How the system works
Generally, lending companies will require a bigger deposit for the self-cert mortgage by as much as 25%. They will also require you to show proof of your income. A number of banks and property companies will require you to submit your confirmed accounts for the past three years. Other financial documents such out bank statements may be required as well as credit investigations. Still other lending companies just ask you to prove that you will be able to make good on your monthly payments.
Who can apply for this type or mortgage?
This kind of mortgage can be the option for individuals who own their own businesses. However others can also make use of this, such as individuals who are employed abroad or those who get bonuses but do not reflect them on their pay slips may use self cert. Sometimes, individuals who own businesses or company executives choose to give themselves small salaries but get bigger earnings through dividends, among others. This can be a good move to manage tax payments but makes it difficult to apply for the standard mortgage. If your income is irregular, you could opt for an adjustable mortgage which will allow you to adjust your monthly payments depending on your present state of affairs.
The terms of payment would be higher compared to the other kinds of mortgages coupled with higher charges or taking out an insurance policy to cover the risk. The FSA have underlined their concern over the alarming practice of a number of brokers which encourage borrowers to overstate their reported earnings to get higher mortgages. You should not forget that not telling the truth about your earnings is illegal. Additionally, overstating your income to get a higher loan could put you in an impossible situation wherein you have no capacity to make good on your monthly repayments. This is a decision that should entail serious thinking because default on payments could mean losing your home.