Can you still get a self-certification mortgage? The simple answer is no, as they were banned by the Financial Services Authority (FSA) back in 2011.
However, as they were only banned in the UK, you can technically get them from overseas lenders.
So is it worth it? Our advice would be that they were banned for a reason, and to be very wary if you do decide to pursue one, and we’ll explain why in a little more depth in this blog post.
What are they?
If you’re wondering what exactly a self-certification mortgage is (or should that be was?), it’s a mortgage where you can specify how much you earn without having to supply any documents to prove this.
They were designed to help those who may find it difficult to prove how much they earn, such as those who are self-employed and those who earn income from many different places, or via commission.
The latest statistics from the Office for National Statistics show that there are more self-employed workers than ever before (4.6 million), so it’s easy to see why the idea of self-certification appeals.
So why were they banned?
The system meant that some people were being granted mortgages which they simply couldn’t afford, and self-certs were dubbed ‘liar loans’.
Lenders now have much more a responsibility to carry out checks to make sure that you’ll be able to make your payments and new rules were introduced in 2014 which you can read about in full in this piece from the Guardian.
Can I get one from Europe?
Technically speaking yes, you could get a self-certification mortgage from a European lender as rules around the continent are less strict, and being able to apply online makes it relatively easy to do so.
The first major company to offer this was selfcert.co.uk, who found exploited the loophole by setting up in the Czech Republic, but after just 48 hours and 4,000 enquiries they had already reached their capacity.
What are the risks?
If you do choose to go with a self-certification mortgage and it turns out that you cannot keep up with your repayments, then you will be more likely to have your home repossessed than if you had used a UK lender, as your mortgage will not be protected by the FCA (Financial Conduct Authority).
This means that you would essentially be on your own and would not be able to make any formal complaints about your lender, nor would you be entitled to any help.
For example, if a mortgage broker wrongly recommended you to take a self-certification mortgage that you couldn’t afford, you would not be entitled to any compensation like you would be with a UK lender.
There are also the obvious problems of getting in touch with an overseas lender.
What if I do choose one?
In general, we would recommend steering clear of self-certification mortgages for the reasons highlighted above, but if you do choose to opt for one we recommend getting in touch to talk through your options with us.
You’ll need to be very cautious and make sure that you get some form of protection with your mortgage as well as making yourself aware of any fees they charge and what the consequences are for missing repayments.
We can also recommend other steps that you can take if you’re self-employed to help you secure a mortgage, so feel free to give us a call on 0800 756 7794.