Are Self-Cert
Mortgages Still Available?

What are self-cert mortgages? 

With self-cert, or self-certification mortgages, applicants are not required to prove their income. Instead, mortgage lenders trust that applicants are honest in their declarations. They are no longer available in the UK.

Why aren’t they available?

Self-cert mortgages were common among self-employed individuals, freelancers, and commission-earning applicants. However, the system was being misused meaning many were able to get mortgages that they could not afford. This was a common problem, and these mortgages became known as “liar loans”.

In 2011, due to the above issue, self-cert mortgages were banned in the UK. As a result, it is now mandatory to provide evidence of income, whatever your employment status. This has led to tighter regulation and more aggressive income assessment methodologies being used by high street banks and building societies.

Did self-cert mortgages lead to the credit crunch in 2008?

During the period when the credit crunch occurred, there were many issues. Mortgage lenders were giving 125% loan-to-value (LTV) mortgages and interest-only mortgages, and generously granting subprime loans and many other products with higher built-in risk. Therefore, we cannot conclude that self-cert mortgages were the only issue that led to the credit crunch.

Getting a self-cert mortgage overseas

It may be possible to obtain a self-cert mortgage from a lender located in another country. However, it is not advisable to get such a mortgage. The FCA has issued an official warning about the risks of these mortgages and has banned them. Some of the risks involved with these types of mortgages are:

  • The lender will be quicker to repossess the property in the event of missed mortgage payments
  • Mortgage products will be quite expensive
  • Complaints cannot be referred to the Financial Ombudsman Scheme
  • Contacting lenders would be more difficult.

Why is it not advisable to obtain a self-cert mortgage?

Obtaining a self-cert mortgage involves a wide range of risks, including the risk of losing your property. The FCA will not regulate self-cert mortgages. As a result, there will be less protection for the mortgagee than when obtaining a mortgage with a UK lender. 

However, self-employed people can opt for other alternatives instead of self-cert mortgages.

What are the alternatives?

The mortgage products available to self-employed individuals or day rate contractors will be similar to that offered to employed customers. The only variance in the process is how evidence of income is provided.

The documentation required and criteria to be met will depend on the mortgage lender. However, there are high street banks and building societies that specialize in self-employed mortgages.

The following are the types of income accepted by mortgage lenders for self-employed or day rate contractors:

  • Salary and dividends
  • Share of net profit
  • Investment income
  • Rental income
  • Pension income

As mortgage brokers, we will be able to look at each client’s circumstances and provide suitable mortgage advice to cater to specific needs.

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage payments.