Self-cert mortgages, or self-certification mortgages, are those that do not require proof of a valid source of income. These mortgages are mostly targeted and built in a way to tend to self-employed individuals or business owners. Most other types of mortgages require the applicant to submit salary slips, bank statements or some other document stating the total amount they earn on a monthly or yearly basis.
Benefiting from Self Cert Mortgages
However, self cert mortgages bypass this requirement and is considered to be a major advantage for self-employed individuals. There can be a number of reasons why these people opt for self-cert mortgages, but the most common are that accounts for the company are not yet available or they do not have time to wait for all the formalities to be completed and want the process to be completed as soon as possible.
Self-employed individuals are known to exploit different tax exemption methods to save on either corporate or income taxes. However, this causes a bunch of problems when they try to obtain a more traditional mortgage; this is where self cert mortgages come into the picture. It is a well-known truth that most self-employed people keep inaccurate records that mostly understates their earnings or income, which might make it difficult to provide the required financial records to lenders when trying to complete a mortgage application.
Self Cert Mortgages – Your Options
This usually only leaves self cert mortgages as the only option because otherwise they will not be able to fulfil even the most basic requirements. Self cert mortgages have become a major debatable topic because of the nature and loopholes of the mortgage itself, as well as how it unofficially condones the malpractices some self-employed individuals take part in to save themselves from pay higher taxes. But overall, experts and borrowers alike, feel that self cert mortgages are one of the better products that have been introduced by the financial market.
It gives self-employed individuals a chance to stay relevant and afford real estate or property by simply providing estimation on how much they might earn in a specific period. Self-employed individuals are actually more vulnerable to losing everything that they have because there is always the probability that their business shuts down, which in turn leads to not having any source of income. Self cert mortgages keeps these people safe in times of financial distress and they do not have to put their property or real estate on the line when bad times come along. However, there is also a major risk with the self cert mortgage in the way of over commitment.
As mentioned above, all the borrowers have to do is provide an estimate, and many will overstate their estimated earnings just to get a hold of a larger mortgage. Obtaining larger mortgage means that they will have to make higher monthly payments. But problem with this is that if they are not earning the amount that they claimed they would, it can become very easy to miss payments and start the downward spiral from there on out. This is why you have to be very careful when trying to get a self cert mortgage.
