Posted 4 Jul 2019
If you’re looking for a self certification mortgage, there’s bad news for you, as they have been banned in the UK. There is however the option to use an overseas lender, as self certification mortgages are not banned in Europe. The Financial Conduct Authority (FCA) has however issued a warning for why you should be careful when using an overseas lender.
If you are self-employed, it’s good to know that there are other mortgage options out there besides self certification. Contact us at iam mortgages today where our experts can talk you through your options depending on your circumstances.
What is a self certification mortgage?
A self certification mortgage lets you tell a potential lender how much you earn, without the need for supporting documents or records of accounts that prove you earn as much as you say you do. The lender literally takes your word for it. This type of mortgage is designed for those who cannot prove their income, such as self-employed people, those on low incomes or those who earn most of their salary through commission. A self certification mortgage is therefore well suited to those on salaries that can fluctuate from month to month.
Why have self certification mortgages been banned in the UK?
Previously, due to the lack of evidence that borrowers had to give to lenders, many people were able to abuse the system and take out huge mortgages that they couldn’t realistically afford to pay back. New rules are now in place from the FCA, in which lenders now have to ensure that all borrowers can pay back any money loaned to them through a mortgage deal. This is why lenders are far more cautious and demand more evidence from borrowers in terms of proof of income such as accounts, payslips and bank statements.
Self certification mortgages and European lenders
It is possible to obtain a self certification mortgage from a European lender, as this type of mortgage is still allowed in Europe, where lenders have less strict criteria. It can however be difficult to find a lender, as some companies can only take a set number of applications at a time to ensure that they get their money back.
There are several things to bear in mind if you are considering taking out a self certification mortgage with a European lender. A major issue is that you could lose your home more easily and quickly if you do not keep up with repayments. This is because your mortgage would not be regulated by the FCA, and you will not have legal rights such as being able to complain to the Financial Ombudsman, request help from the FCA, or request compensation from a lender which sold you a mortgage you couldn’t realistically afford. The FCA has advised UK borrowers of these risks and the lack of protection associated with taking out a self certification mortgage from a European lender.
What should I do if I decide to get a self certification mortgage?
If you would still like to go ahead and pursue a self certification mortgage with a European lender, the FCA advises that you take the following steps:
- Speak to a mortgage advisor based in the UK, who can help you conduct a risk-assessment. They will also help you to determine whether the lender is regulated by an official body.
- Read the terms and conditions of the mortgage very carefully to ensure you understand the level of protection you have when taking out the loan.
- Find out how the mortgage lender deals with missed repayments and problems you may have with meeting repayments.
- Find out the fees that are charged by the lender.
If you are self-employed and would like more information on other mortgage options that are a great fit for your employment status, talk to us at iam mortgages today. Our team of helpful experts can talk you through your options so that you can find the right deal for your circumstances. Our advice is completely free – just fill in an enquiry form or drop us a line.