Self Certification Mortgages
Self-certification is a simple way of detailing your income as you simply self declare what you earn and the lender will not insist on seeing audited accounts.
This is how a self-cetification loan should work, but there are still some lenders who will need you to prove your income in other ways, such as an accountant's certificate. This is a document signed by your accountant to say that your income is sufficient to service the loan requested. You may also be asked to produce your business bank statements for a set period so the lender can look at the gross income you have received.
Most lenders will supplement this information with credit searches. If you are a home owner, you will be asked to supply your existing mortgage statements, and if you are renting the lender will ask for a reference from your landlord.
Self-certification has limits - most lenders will only allow you to prove your income in this way if you want to borrow less than 75% loan to value, so you will need to put down a substantial deposit. However, some lenders may allow you borrow up to 85% on a self-certification basis.
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If you want o borrow more than 85% of the value of the property (you have less than 15% deposit), you may find it difficult to get a self-certification loan.
To prove your income you will have to get your accountant to provide up to three years' worth of audited accounts. These should show that you can afford to repay the mortgage based on your net profit.
If you have been trading for less than three years you could run into problems, or if your accounts have shown a downturn in any of the past three years some lenders may not offer you a mortgage. In addition, some lenders will take an average of the past three years' income rather than just looking at what you have earned in the current year.
Whichever method of proving your income you choose, note that a credit check will be carried out.
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