Self-certification mortgages are mortgages that are available without a formal income check. Self cert mortgages can be a good option for self-employed or independent professionals who would otherwise have a hard time finding a mortgage lender. Self-certification mortgages are also now available within the retirement sector, in conjunction with the right equity release advice.
In fact, lifetime mortgages and pensioner mortgages where the repayment vehicle is the sale of the property are all essentially self-certification mortgages as they do not depend on the income of the applicant. The lending criteria for these pensioner mortgages are mainly the age of the applicant and the property valuation.
For instance, Stonehaven’s Interest Select Plan is an interest only lifetime mortgage. Clients can borrow a tax free lump sum against the value of their property. Interest can be repaid in full every month, and the principle amount of the loan is repaid when the property is sold. In fact, Stonehaven equity release will allow you to set up a partial repayment facility, if the full amount of interest is out of your budget range. Therefore, rather than all the interest being repaid, a contribution towards this amount is paid.
Therefore, rather than the balance remaining level for the duration of the lifetime interest only mortgage, there will be an element of roll-up interest, albeit significantly lower than if no repayments were made at all. This scenario is ideal for candidates who are risk averse and wish to control the future balance of these pensioner mortgages for their children’s inheritance.
Being a lifetime mortgage, there is no fixed term and the loan will continue indefinitely, which will be until sale of the property, which is usually on death or moving into long term care.
Self Cert 2013 Lending Criteria
The lending criteria for this loan are based on the age of the youngest applicant and the value of the property. Plans start at age 55 with a minimum property valuation to qualify of £70,000. The property can now be situated in England, Wales & mainland Scotland.
As long as applicants can make the minimum monthly repayment of £25, there is no question of requesting income. Stonehaven’s Interest Select plan can therefore be safely categorised as a self cert mortgage. Once the mortgage is set up however, the premiums cannot be amended, other than to stop interest payments completely and convert to a roll-up lifetime mortgage plan. This feature can be used as a safety net in case the mortgage becomes unaffordable in the future & effectively prevents a situation whereby normally repossession would ensue. Repossession for none payment of premiums cannot therefore occur with the Stonehaven Interest Select Plan.
Another feature that appeals in today’s economic climate is that of adverse credit or poor credit rating. These lifetime interest only mortgages have leniency towards this. They will permit arrears and defaults. Additionally, they will accept CCJ’s (County Court Judgements) upto a certain level as long as they are repaid from the proceeds and were for understandable reasons.
Like most equity release schemes, Stonehaven base the lending on a loan-to-value principle. Stonehaven have four tiers of loan-to-values and each comes with its own interest rate. In essence the more you borrow against the value of your house the higher the interest rate becomes. Conversely, the older you are the greater the amount that can be borrowed, hence it is important you receive independent equity release advice to assess which tiered rate of interest applies and is best for you.
For instance a male aged 65 with a property value of £250,000 could release the following with Stonehaven: -
| Product Name |
Maximum Borrowing |
Interest Rate |
Loan-to-Value |
| Interest Select Lite |
£52,500 |
5.99% |
21% |
| Interest Select |
£60,000 |
6.08% |
24% |
| Interest Select Plus |
£67,500 |
6.17% |
27% |
| Interest Select Max |
£72,500 |
6.81% |
29% |
Who else provides self cert lifetime mortgages on an interest only basis?
Other pensioner mortgages are becoming increasingly available such as the more2Life Interest Choice Plan. This is another self-certification mortgages whereby no income checks are made by the lender. The mortgage is only repaid once the property is sold, which is when the client dies or moves into permanent care, or decides to make an early sale for any other reason.
Self-certification mortgages are not very common in the regular residential mortgage sector as lenders are reluctant and wary of lending without formal income checks under FCA (Financial Conduct Authority) regulations. Interest rates are often higher and the loan to value ratio may be lower than traditional mortgages. However, they have been designed with security in mind, something which interest only mortgages of the past haven’t been.
Many pensioner mortgages which rely on the property sale for repayment are essentially self-certification mortgages as they don’t carry out income checks for approval. For these mortgages the main relevant criteria are the age of the applicant which helps determine the expected term of the loan and the property valuation which helps determine the loan to value ratio.
For a full assessment of eligibility criteria with the range of interest only lifetime mortgages that Equity Release Supermarket have available, please call Freephone 0800 678 5159 or email [email protected].
Further information on the range of self cert interest only lifetime mortgages can be found on our Compare Equity Release Deals page.
