Self-Certification Current Account Offset Mortgages
Self-Certification Mortgage
Self-certification mortgages are available if you cannot verify your income. This could be for a number of reasons including:
- It comes from a number of sources.
- You may not have been trading for long enough to have the required number of years accounts.
- You may have a low basic salary but achieve bonus or commission payments or a regular second income.
The lender will ask for details of the your income, but they will not need to see proof of total earnings. Other terms will depend upon the lender's requirement and in accordance with the rates prevailing in the market place.
It is a criminal offense to lie about your income.
Current Account and Offset Mortgages
A current account mortgage lets you operate your mortgage borrowing through a current account. In effect, it is like having a large overdraft. If you had a mortgage of £100,000 and £1,000 credit in your account your balance would show as £99,000 in the red. You may be required to pay your salary into these accounts.
These mortgages can let you pay off your mortgage early as any cash going into the account, such as salary, reduces your outstanding debt. If you are disciplined you can save on the amount of interest you repay and the length of your mortgage. Many mortgage lenders show you on a regular basis whether you are ‘on track’ or above / below track with your payments.
Some current account mortgage providers also allow loans to be attached to these mortgage accounts, with interest charged at the same rate as the mortgage. This means all your debts are held centrally in one account.
With an offset mortgage you keep your balances e.g. mortgage, savings, current account etc in separate accounts but all balances are offset against each other. This means that the credit balances allow that much of the mortgage not to accrue interest.
With some of these mortgages you can make underpayments – this means if in one month you have an unexpected expense you can pay less off your mortgage. Payment holidays may also be available where you pay nothing for a month or so. Over-payments can also be made.
Most current account and offset mortgages are variable rate mortgages which means the amount you repay increases or decreases in line with any interest rate changes.
General things to consider when taking out a mortgage:
- Minimum and maximum mortgage borrowing
Some mortgage providers have minimum and maximum amounts of money that they will lend you for a mortgage. - Mortgage loan to value
This is the ratio between amount of the mortgage and value of property. So, for example if you want a £90,000 mortgage on a property valued at £100,000 the loan-to-value you require is 90%. Some mortgage lenders have limits on these. - Mortgage high lending charges
This is a fee that is used to buy insurance to protect the mortgage lender if you borrow more than a certain amount. Many mortgage lenders will lend you up to, say, 90% of the value of a property without this fee. But if you want to borrow more, the lender usually needs you to pay for insurance to ensure that it will get all of its money back if the property has to be sold for less than the amount of the mortgage. It must be noted that the insurance company will take recourse against the homeowner even though the provider is compensated for the shortfall. - Mortgage rate
It is worthwhile shopping around to make sure you are getting a good deal for your mortgage. Rates do vary and this can make a big difference to how much you have to pay each month. - How much can you borrow
Most mortgage lenders base the amount they will lend you on how much you earn. For any mortgage the lender will assess how much they will lend you based on your income and outgoings. - Mortgage early repayment charges
If you repay your mortgage at any time before the end of the mortgage term you may have to pay certain fees or an interest penalty. This penalty often decreases with time. An extended redemption tie-in means that this penalty will continue after the initial term of the mortgage. - Mortgage portability
This means the mortgage can be kept with the same lender when you move house. - Mortgage overpayments
This is when monthly repayments to a mortgage can be increased. This means the mortgage is repaid early, which will save you money on interest. - Mortgage related insurance
Lenders insist that the property is insured with a buildings insurance policy, covering against the usual risks. In addition to this you will need contents insurance to cover things such as theft, fire and damage. Another form of insurance is a mortgage payment protection plan that gives income protection against unemployment, sickness and redundancy. - Life assurance
It is a good idea for life assurance to be taken out to cover the value of the mortgage, allowing the mortgage to be repaid should you die. - Legal costs
Usually a solicitor or licensed conveyancer needs to be appointed to deal with the legal aspects of buying a property. There will be costs involved and these can vary so it is worth getting a few quotes. - Valuation / surveys
It is a legal requirement that the mortgage lender has the property valued to make sure it is an acceptable security. The mortgage lender's surveyor will need to inspect and value the property. The cost, if any, of this valuation depends on which lender you choose and the value of the property. - Mortgage arrangement fees
Most mortgage lenders charge an arrangement or application fee when you take out a mortgage. Some mortgage lenders will let you add the cost of this to the mortgage. The fee depends on the mortgage lender and the mortgage offer. - Stamp Duty
This is a government tax based on the property's purchase price and is calculated as follows:- Up to £125K = Nil
- £125,001 - £250K = 1%
- £250,001K - £500K = 3%
- £500,001K+ = 4%.
