Self-Certification Mortgage Applications Rise

The attractiveness of self-certification mortgage products is boosting the overall number of mortgage applications in the UK.

For true self-certification mortgage products, the applicant does not need to fully prove their income. Rather, they make a declaration of income to the lender based on their past earnings and expected future earnings.

Self-certification mortgage products are growing in popularity as more people receive income in variable patterns and through non-standard forms such as bonuses and commissions.

Originally self-certification mortgage products were designed for the self-employed. The changing composition of the workforces has, however, meant that many employees cannot fully prove their employment income as well.

Not having to fully prove income is believed by some analysts to increase the risk of over borrowing and therefore repossession.

However, provided the applicant does not exaggerate their income on their self-certification mortgage application, they should only be approved to borrow the maximum amount they can afford to repay in accordance with the lenders' criteria.

Additionally, lying about income on a self-certification mortgage application is a criminal offense, and more lenders are challenging applicants' income declarations, reducing the likelihood of borrowing putting themselves at financial risk.

Interest rates are usually higher on self-certification mortgage products than for standard mortgage products and loan-to-values can also be lower. This means the borrower will have to fund a larger deposit thereby increasing their initial investment in their own home.

This can act as an extra incentive for applicants to not lie about their income and over borrow on their self-certification mortgage. If the borrower has their own money at risk, instead of borrowing 100% of the property's value, they are more likely to not over borrow and increase the risk of repossession.

As the composition of the workforce shifts from more people becoming self-employed, self-certification mortgage products should continue to rise in popularity. It is estimated that a quarter of the UK's population are already self-employed and therefore have trouble proving their income, and this figure is growing.

Mortgage lenders have recognised this which is why self-certification mortgage products are so widely available on today's mortgage market. Demand for self-certs should continue into the future and as a result the products should become more competitive.

If you require a self-certification mortgage you should contact an independent mortgage adviser for expert, impartial advice.

UKMortgageSource provides up-to-date Self-Certification Mortgage information

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