Self-cert mortgages

Self-certification mortgages have been banned in the UK, however due to a loophole they are still available from some European lenders.

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By

Matthew Boyle

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Self-certification mortgages, commonly referred to as self-cert mortgages, were banned in the UK by the Financial Conduct Authority (FCA) in 2011.

These mortgages allowed borrowers to specify how much they earned without providing documents as proof.

However, the FCA ultimately ruled that these mortgages presented too much risk of borrowers falling into arrears.

What is a self-certification mortgage?

The only difference between a self-cert mortgage and a traditional mortgage is that the applicant doesn’t have to prove their income. Instead, lenders trust them to be honest about it.

These mortgages were popular in the UK among the self-employed, freelancers and commission-earning applicants. However, they were abused by many applicants who ended up being granted mortgages that they couldn’t afford. This became such a common problem that self-cert mortgages were dubbed “liar loans” by the media.

It is now compulsory for all mortgage applicants to provide evidence of their income, instead of self-certifying.

Can I still get a self-certification mortgage?

In the UK you can no longer get self-certification mortgages as they’ve been banned, as they were thought to present too much risk to borrowers. However, due to a loophole they are still available to get from European lenders, although the FCA has issued a warning about doing this, so it’s not recommended.

Getting a self-certification mortgage from overseas

It may still be possible to get a self-cert mortgage from an overseas lender, but that doesn’t mean you should. In fact, the FCA issued an official warning about the risks of these products.

The main risks of getting a self-cert mortgage overseas are:

  • The lender may be quicker to repossess your property if you fall behind on payments.
  • The lender may be more difficult to contact.
  • The lender may add extortionate fees to its mortgage products.
  • You can’t refer any complaints to the Financial Ombudsman Scheme.
  • You can’t claim compensation from a mortgage adviser who recommends you an unaffordable product.

If you decide to apply for a self-cert mortgage from overseas, it’s recommended to double check what fees you’ll be charged, how the lender deals with missed repayments and what protections you’ll be offered if things go wrong. A UK mortgage advisor may be able to offer useful advice on this.

Why shouldn’t I get a self-certification mortgage?

There are a number of risks involved in getting a mortgage from overseas – including an increased risk of losing your home. This is because the mortgage won’t be regulated by the FCA, so it would come with less protection than a mortgage with a UK lender. These protections include rules on fair treatment if you get into difficulties and can’t meet your repayments, the option to refer complaints to the Financial Ombudsman Service and compensation from an adviser if they recommend a mortgage that you can’t afford. You also won’t be eligible for help from the FCA if anything goes awry, because the mortgage would be regulated in the country in which the lender is based.

While the downsides to getting a mortgage of this kind are clear, if you are determined to get one then the FCA recommends that you first talk to a UK-based mortgage adviser, check the mortgage’s protections outlined in its T&Cs, check the missed repayment procedure, check what fees are charged and find out who the lender’s regulator is.

How can you get a mortgage if you’re self-employed?

Contractors and self-employed mortgage applicants have access to the same mortgage products as everyone else.

The only difference is it might be difficult for them to show enough evidence of their income to convince lenders of their eligibility.

Most lenders ask for at least two years’ worth of accounts – detailing income, expenses and operating costs – in order to consider a self-employed applicant. The more evidence you can provide, the better.

The lender will assess your average earnings over recent years to determine your ability to make timely mortgage repayments. If your financial situation is especially complicated, you may be referred to an underwriter.

If you’re self-employed, it may help to contact a professional mortgage advisor, who will be able to recommend you the providers most likely to approve your application.

Speaking to a specialist lender

If you are struggling to get a mortgage via the traditional methods you could speak to a specialist lender. They can provide the expertise on a particular area of lending where you’re looking for assistance.

Bottom line

A self-cert mortgage doesn’t require you to prove your income. It’s banned in the UK due to people taking advantage of the trust-based system. Some European lenders still provide self-cert mortgages, but it’s not recommended to avail of them, as advised by the Financial Conduct Authority.

Finder survey: Are you currently self-employed?

ResponseFemaleMale
No85.84%81.79%
Yes14.16%18.21%
Source: Finder survey by Censuswide of 1032 Brits, December 2023
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