Self-Certification Mortgages
What a professional mortgage advisor would do if you are self-employed and wished to take out a home mortgage loan is to the try to evaluate whether or not you require a ‘self-cert’ mortgage. This is different from a ‘self-employed’ mortgage but the two terms tend to get mixed up by people. A ‘self-employed’ mortgage is a type of mortgage , whether capital repayment or interest only (usually flexible however to account for sudden changes in the clients income pattern ) but only the major factors have been pre-decided based on your individual business circumstances , such as your net (think overall revenue after deducting expenses) income which derives from your business. Generally the only widely accepted documented proof of this income are records of audited tax accounts going back 3 years AND declared by a Certified Chartered Accountant.
Now in the majority of cases this poses a slight problem. Many people who are in business pay an accountant to structure there affairs so that they pay the least tax as legally possible. Often this is by offsetting business expenses and day to day running costs against all turnover revenue to make the self-employed persons income seem less. This is where it works against applying for a mortgage as a self-employed person , where lenders give preferential rates and higher finance proportions to those with a bigger balance sheet boasting a higher net income at the end. This spawned the birth of the ‘self-cert’ mortgage , where no real documented evidence of income is (or was as might be case after the 2009 financial crisis - explained further below ) required. Simply sign the self-certified declaration form and away we go. People with wildly unpredictable incomes such actors or models require this kind of financing.
