what is a self cert mortgage?

hethmar

If you are tied in for a million years with your current mortgage, dont worry about it You should have more than enough paperwork when it comes to look for another mortgage and you may well want to stay with your current bank.

Self cert were also known as "Lie to Buy" mortgages. And though they arent supposed to exist any longer I bet there is somewhere you can still get something very similar.

inmypocketnottheirs

Self certs were applicable in the case of a company director/shareholder who paid themselves at just below the taxable allowance. Dividends could then be taken into account (dividends are not tax free if corporation tax is paid on them) as could income derived from mileage.

It will undoubtedly be unsavoury to a lot of PAYE employees, but being a limited company can be very tax efficient.

In these cases self cert is entirely justifiable, however due to the abuse of the product it has now been withdrawn.

Thrugelmir

inmypocketnottheirs wrote: »

In these cases self cert is entirely justifiable, however due to the abuse of the product it has now been withdrawn.

The issues with self cert surround the declaration of income without substantiation. Whether it be self employed, employed or sole employees of limited companies.

Once the OP has been established for sufficent time as determined by the lender. Then having a proven track record of income will be sufficent to support a mortgage application.

puddy

jimjames wrote: »

And potentially various other costs as well - computer, stamps, paper etc, there must be some additional costs other than petrol to prepare a report.

yes, sorry, i meant mileage allowance rather than petrol. we already had the computers so i cant claim for them.

i also forgot insurances, memberships of my governing body, subscriptions and training costs, stationary, its quite a lot actually, i keep a log of it on a word document, i hope thats enough to do, i just write stuff down when i buy something

herbiesjp

inmypocketnottheirs wrote: »

Self certs were applicable in the case of a company director/shareholder who paid themselves at just below the taxable allowance. Dividends could then be taken into account (dividends are not tax free if corporation tax is paid on them) as could income derived from mileage.

It will undoubtedly be unsavoury to a lot of PAYE employees, but being a limited company can be very tax efficient.

In these cases self cert is entirely justifiable, however due to the abuse of the product it has now been withdrawn.

Dividends can be taken into account via a full status mortgage - they were not the reason self certs existed.

ninky_2

"self cert" aka "lie to buy". you basically used an intermediary broker who helped legitimise the application, said what you earned and got an accountant to sign it off (usually provided by the same intermediary). most people did this a) to be able to get a mortgage on a higher amount of their turnover than counted by hmrc as taxable income b) to over inflate their actual earnings in order to get a bigger mortgage than they would have done anyway.

interest rates on lie to buy were often higher and lenders didn't seem to care too much about genuine affordability as they expected house prices to rise to cover their risk on defaults.

now of course it's a different picture. with the very real risk of house price falls lenders are far more worried about defaults and so don't want people making up incomes and then not actually being able to meet repayments.

you can still get standard mortgage products with self employed income but need to prove the income that has been declared (and taxed) by hmrc. afaik 3 years of accounts is pretty standard and they like to see a stable average and/or generally an increase year on year. others may know of examples of lender who are more lax. if you know you will want to apply for a mortgage in the next 3 years it is worth discussing this with your accountant as it may well influence how you want to manage your financial affairs.

FraudBuster

The tough new proposals, published in the consultation paper, form part of a major review by the FSA into the UK mortgage market and are based on detailed analysis of past lending decisions, looking at the causes of arrears and repossessions since 2005.


The FSA found that:

• 46% of households either had no money left, or had a shortfall after mortgage payments and living costs were deducted from their income;
• Almost half of new mortgages between 2007 and the first quarter of 2010 were provided without a customer having to verify their income;
• The share of interest-only mortgages has been increasing. At the peak of the market, over 30% of all mortgages were interest-only;
• Many consumers with no repayment vehicle count on future house price rises or uncertain life events to repay their mortgage and some have no plan at all;
• Borrowers with a credit-impaired history are particularly vulnerable.

http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/118.shtml

GMS

ninky wrote: »

"self cert" aka "lie to buy". you basically used an intermediary broker who helped legitimise the application, said what you earned and got an accountant to sign it off (usually provided by the same intermediary). most people did this a) to be able to get a mortgage on a higher amount of their turnover than counted by hmrc as taxable income b) to over inflate their actual earnings in order to get a bigger mortgage than they would have done anyway.

interest rates on lie to buy were often higher and lenders didn't seem to care too much about genuine affordability as they expected house prices to rise to cover their risk on defaults.

now of course it's a different picture. with the very real risk of house price falls lenders are far more worried about defaults and so don't want people making up incomes and then not actually being able to meet repayments.

you can still get standard mortgage products with self employed income but need to prove the income that has been declared (and taxed) by hmrc. afaik 3 years of accounts is pretty standard and they like to see a stable average and/or generally an increase year on year. others may know of examples of lender who are more lax. if you know you will want to apply for a mortgage in the next 3 years it is worth discussing this with your accountant as it may well influence how you want to manage your financial affairs.

A scandalous post and littered with untruths.

'Lie to Buy'. So was every self cert loan fraudulent? No

High street lenders allowed self cert too so your definition of dodgy brokers and dodgy accountants is incorrect.

Just to clarify, if the broker got their supplied accountant to 'sign off' the income it would have been Full Status, therefore not self cert. However this scenario would have been a lie, infact fraudulent.