No Income Proof Mortgages
These are for people who cannot prove their income.
More commonly called self certified mortgages or non status mortgages they are designed for self employed people who actually earn more than what they declare on their accounts as net profit, or for people who are employed but may have income coming in from different sources in addition to their main job.
Unusual working circumstances...
The fact is that working habits have changed dramatically over the last 10 years with more and more people now working two jobs or having a main job and extra income from cash in hand jobs. Others have a job and a part time business providing extra income.
People with such circumstances will find it difficult to get a mortgage from the high street banks because they may not be able to prove all of their income or what they can prove may only be a portion of their full income.
How it works if you're employed...
The good news is that there are lenders who specialise in lending to people who cannot prove their income.
The way this works is that on the mortgage application you declare your own income and occupation details and certify that this is your true income.
The lender will then base how much to lend you on the basis of this declared income.
The lender may contact your employer to verify that you work there and are full time as well as your occupation but will not ask for any salary details.
How it works if you're self employed...
If you're self employed or a director with over 25% shares in your company then the lender may contact your accountant to verify the nature of your business, how long you have been established for and that the business is fully solvent and trading.
Again the lender won't ask for any details regarding your earning or net profits.
If you do your own accounts then the lender may ask for copies of your tax assessments but with the figures blanked out as they are not interested in seeing your earnings or net profit details.
You won't be asked to provide bank statements on a self certified mortgage as the idea is that your income could fluctuate on a monthly basis and hence bank statements may not accurately reflect your true earnings.
You need a Self Certified Mortgage if:
- Your monthly income fluctuates dramatically - some months your earnings are high and some months they're low
- You have several sources of income some of which is hard to prove e.g. cash in hand
- You are self employed earning more than what you have declared to the tax man
- You genuinely find it difficult to prove your income for any other reason
Deposit required
To get a self certified mortgage you will need to put down at least 5% deposit and more likely 10% deposit.
The interest rate on the mortgages will be a bit higher than normal mortgages where you're proving income, but the rate also varies depending on how much deposit you put down and how good your credit is.
The more deposit you put down then the lower the rate will be on your mortgage, and also if you have clean credit, the rate will be lower than if you have bad credit.
There is a self cert mortgage for every type of credit problem so that won't be an issue if you do have credit problems.
How much can you borrow...
Generally you can borrow around 4 or 5 times your certified income. So if you self certify your income as being £40,000 then you will be able to borrow £160,000 to £200,000 subject to putting down at least 5% to 10% deposit.
You can get a self certified mortgage when purchasing a property, whether a first time buyer or home mover, and you can also remortgage to a self cert mortgage or remortgage from one self cert mortgage to another, so you see they are pretty much just like a normal mortgage with the only difference being that there is no need to prove income.
Some examples of self certified mortgages:
- An applicant who has a full time job but also does handy work in the evening and weekends to make extra money as cash in hand
- A city trader who has a basic but most of his money comes from his bonus which he receives once a year hence the last 3 months bank statements may not reflect his true income
- A commission only sales person who has no basic but earns purely off commissions made per sale. Some months he/she could have a good month and other months he/she could have a bad month
- Someone who's self employed but has an offshore company and hence shows very little money in his UK bank account
And many other examples but you get the point.
Note of caution...
A note of caution. The Financial Services Authority considers it a crime for you to falsify your income details on a mortgage application in order to get lending. As a result, only use self cert mortgage in genuine situations only.
To find a suitable self cert mortgage click here.
If you'd prefer to get some personal advice click here.