Posted by John Yerou
on July 8th, 2015 09:51am in
Last Updated on September 18th, 2018 02:05am.
Estimated Reading Time: 1 minute
If you want to renew a self-cert mortgage like for like, the bad news is: you can’t. Or, if you preferred the flexibility self-cert offered and want to go back after having a fixed or variable rate mortgage? Sorry, you’re out of luck, too.
As a contractor or freelancer, self certifying your earnings was an easy solution in the absence of payslips or accounts. Lenders took you at your word, as the affordability checks prior to the credit crunch were less stringent.
You didn’t even mind paying over the odds, just so long as you got the funds. You were earning good money, but your contracts were short term. Heck, you even thought it was right that you should pay higher interest than everyone else.
Then, the credit crunch happened
Well, things changed once the dust of economic meltdown settled. The FSA warned lenders of the inherent dangers of allowing people to self-certify their earnings.
Potential mortgage borrowers from all walks of life, even PAYE employees, were over-estimating their affordability. In hindsight, it was an accident waiting to happen. But no one foresaw the extent of the problem, the government bailing many banks out.
There was so little onus on the lenders to check that what a borrower said they were earning was true. But:
- the credit crunch happened;
- the criteria for borrowing became much more strict;
- those who’d lived their lives on credit came a cropper.
Self-cert mortgages consigned to the annals of financial folklore
In 2014, the findings from the Mortgage Market Review became law. But long before that, lenders had removed self-cert from their portfolios.
The closest you’ll get now is an interest only. But deposits tend to be on the high side, some lenders requiring borrowers to put down at least 50% of the home’s value. Plus, the repayment vehicle must have at least a chance of working.
What you do next depends upon your specific circumstances. Many aspects may influence what the best product is for you moving forward:
- how you operate;
- how long until you retire;
- how long you have left on your existing mortgage;
- even the reasons you want to remortgage.
Whatever your reasons, don’t put the decision to try contract-based underwriting off any longer. You can access interest rates at least as competitive as those available for PAYE employees. There’s no time like now to move to a fixed or variable rate repayment mortgage based on your true affordability.
Author: John Yerou
John Yerou is the owner and founder of C&F Mortgages; a trading style & trade mark of the award winning Mortgage Quest Ltd. One of the most recognised names in providing mortgages for contractors and freelancers across the UK.
In 2004 John began his career in Financial Services as an independent mortgage adviser and broker. John has been instrumental in negotiating bespoke underwriting for contractors with high street lenders.
His presence in the industry as a go-to expert is growing by the day and he is regularly cited and writes in publications both locally and nationally.