Bank managers are probably the least risk-taking people you'll ever meet. If you don't have proof of a steady income and a good financial history, you may get a cold response when you ask for a loan. But there are choices for people who don't do what everyone else does.
You might want to look into a self-certified mortgage if you are self-employed or have an irregular income. In the past few years, the mortgage market as a whole has become more flexible and competitive, and more lenders now offer self-cert mortgages. Self-certs used to only be available from specialised lenders and had pretty strict terms and conditions. Now, most of the major high street banks and building societies offer them.
How it works
When you get a self-cert mortgage, most lenders will want you to put down a bigger down payment, usually 25 percent. Some lenders, like banks and building societies, will want to see proof of your income for the last three years in the form of certified accounts. They may also check your credit history and ask for bank statements. But there are some mortgages where the only thing the lender needs to know is that you can pay back the loan.
Who does it help?
Most people who get this kind of mortgage are self-employed, but there are other people who can also benefit. Self-certification is an option for people who work overseas or get bonuses that don't show up on their pay stubs. Business owners and company directors sometimes pay themselves a small salary but make more money in other ways, like through dividends. This can help with tax planning, but it makes it harder to get a conventional mortgage. If your income isn't consistent, you might want a mortgage that lets you change the amount you pay each month depending on how things are going.
The bad things
You may find the terms less generous than with other types of mortgage, and the lender may apply Higher Lending Charges or an indemnity to protect them. The FSA recently brought up the disturbing fact that some brokers are telling borrowers to lie about their income so they can get a bigger mortgage. Remember it is a criminal offence to lie about your income, and over-estimating what you earn could mean that you find yourself with monthly repayments that you cannot afford. If you can't keep up with the payments, your home could be taken away.
