Non Standard Mortgages - Self Certification
Self Certification Product Types
As with most other types of non-conforming mortgage, the
range of self-certification home loans is always growing
and diversifying. There are now over 100 self-employed specialist
and self-certification lenders on the market and it is usually
possible to find the full range of mortgage products.
Some lenders offer as many as ten different self-certification
products, giving borrowers almost as much choice as their
mainstream counterparts. Fixed, discount, flexible, cashback,
100% and buy to let mortgages are now all available to those
borrowers wishing to self-certify.
Most importantly, given the varying earnings pattern that
applies to many self-certification borrowers, many of the
products now on offer come with a good selection of flexible
features, including daily interest calculation, overpayments,
payment holidays and drawdown facilities.
The only downside is that the interest rates still tend
to be marginally higher than a mainstream mortgage. This
is not entirely surprising, particularly where the self-employed
are concerned. Statistics show that the majority of businesses
fail within first two years, so lenders tend to reflect
this additional risk in a higher interest rate. Similarly,
the risk of delinquency is slightly higher among those with
fluctuating earnings and non-guaranteed bonuses than with
those who make it through the normal credit scoring systems,
so it is understandable that there is something of a risk
premium to be paid. But again, as with other non-conforming
mortgages, competition is lowering the rates on offer to
self-certification borrowers, making the difference barely
noticeable at times.
For some reason, many tracker mortgages in this sector
tend to be tied to the LIBOR rate as opposed to the Bank
of England base rate. The LIBOR is the notional rate at
which banks agree to buy and sell money at some point in
the future. This measure is market driven and therefore
tends to be a little more volatile and quick to react, often
pricing in changes before they are decided by the MPC.
