Ten years ago if you were self employed you were very limited to the deals that were available to you. Lenders tended not to like it if you couldnt prove you income when apply for a secured loan or mortgage.
Things have changed, because they have had to. With more and more people starting their own business and companies opting to contract staff on a self employed basis, lenders have had to change policies. Now many more lenders have had no choice but to offer self certification loans and mortgages in order to service more customers.
With a self certification product you can state your income without having to provide payslips. Such loan and mortgage products are available with specialist and some high street lenders.
The hook is that with a self cert loan you will normally have to pay lager deposit and slightly higher interest rates than a standard borrow would. You should also be prepared to incur slightly higher fees as well.
Different lenders will have different criteria. Some will be more concerned about affordability, others with job title and credit history others will require accounts, accountants letter or bank statements.
Whether you are with a specialist lender or a high street one, you will generally need a minimum of a 10 per cent deposit (some 5 per cent). In most cases the bigger the deposit you put down the lower the interest rate will be, because you are reducing the lenders risk. You will also pay more fees when putting down a small deposit.
Self Certification loans and mortgages used to only be available through specialist lenders, but this is now changing. A handful of dynamic lenders have realised that they need to include the self employed into their mainstream products.
Even if you do not have three years worth of accounts, do not think that a self certification product is your only option. Lenders are now embracing more sophisticated credit scoring techniques to better weigh up the potential lending risks.
Another bonus for the self employed, is that if you can get together a 25 per sent deposit then you will be able to approach most lenders and choose from their mainstream loan products. Also because of the size of the deposit you are putting down, many of the fees will be crossed out.
Although self cert loans are a lifeline to many legitimate people there are a small number of borrowers that take advantage by lying about their income. Over inflation of income in order to have access to more lending or get on the housing ladder is not only illegal but also very dangerous. People that do this will often find that eventually they fall behind on their loan repayments and can face repossession. It pays to make sure that you are always honest on your application.
The key rule is to ensure that your mortgage loan repayments are going to be affordable. Flexible mortgages are great for the self employed that might have seasonal spikes and dips in their income. They allow you to overpay, underpay and take payment holidays if you wish to.
The best way to ensure you get a good deal and the right product is to use a good broker. They will have access to a number of lenders and products and be able to advise you on the best cause of action.
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