At the moment about 18% of the UK population
is self-employed, and it is predicted that, over the next
10 years, there will be about 3.2m in this position.
Numerous self-employed people from various trades are
earning big money. But, if they want to utilize that cash
to buy a home, they are likely to come across a big stumbling
block - standard mortgage lenders tend to be extremely
apprehensive about lending to anyone who cannot prove
their earnings via pay slips.
Self-certification mortgages fit under the
so-called non-standard banner and there are only a handful
of lenders in the market. The market is becoming more
competitive and deals are therefore improving. You are
still likely to pay more, but there should still be the
opportunity to switch to a better rate - and, often, another
lender - a few years down the line.
A self-certification mortgage is a mortgage
offered on the basis of you stating what your likely income
will be, rather than providing documentary evidence. But
you may have to ask an accountant to back up your statement.
If you have more than two - and, in many cases, three
years' worth of accounts, then you should be able to apply
for a standard buy-to-let mortgage.
You are asked to pay a higher rate because
statistics show most businesses fail within the first
two years of trading. And if you are left with heavy debt
there is a possibility you could lose your home.
However, some self-certification mortgages
are better than others, and, if cash flow is a problem,
it's worth checking out those that offer payment holidays
and the facility to pay more when you can. It may well
be worth seeing a broker, as they can explain any intricacies,
but be sure it is a reputable firm and regulated under
the mortgage code. Whereas standard mortgages typically
offer a 95% loan to value, self-certification mortgages
almost always require a higher deposit: a loan-to value
of 90% and, more commonly, 75% is usually offered.
