The self employed and those who run small Limited Companies (generally treated as self employed by lenders) had traditionally had a hard time obtaining a mortgage. Generally, lenders required 3 years accounts, as proof of income. This presents two problems for the potential borrower.

• The latest accounts often include income from as far back as 21 months ago, income especially from a young business will often have risen significantly since then. A self employed person could have been in business successfully for 4 years, yet not have 3 years accounts available.
• The self employed use every legitimate accounting technique to keep their profits, and therefore Tax, as low as possible.

Additionally, many lenders would not lend if the accounts that were available showed a decline in profits from one year to the next regardless of the reason.

As the self employed market grew, particularly after the mass unemployment of the late 1980's drove more people into the sector, so a large market found itself badly served by Mortgage Lenders.

Yet again, astute lenders, or specialist divisions of established brands, seized the opportunity to service this market. They reasoned that if a self employed person had a sufficient deposit, they could be trusted to "SELF CERTIFY" their income, without providing proof. The risks were minimal, in that the large deposit, ensured that the lender wouldn't take a loss, if the borrower defaulted. Also, the self employed tend to be self reliant and hard working, and would be unlikely to put their equity in the property at risk. The self certification market began to take shape.

In common with other rule relaxations, as the lenders gained more experience, self certification mortgages became easier to obtain. Deposits required were reduced to around 15% from 25%. Even the employed were allowed to self certify.

Why might someone need to self certify, if they are employed?

Lenders often will not take into account non-guaranteed bonuses, commissions, or overtime. Self certification allows the total income to be taken into account.

Recently the system has been exposed as being abused. 

If you think a self certification mortgage is right for you, and you'd like to discuss it we me, you can contact me here