Mortgages for the self employed or self certification mortgages, also called self-cert, are available to self employed people who have the necessary funds to make a down payment for a home mortgage but do not have sufficient documentation to prove their income.

One of the main disadvantages that a self-employed borrower faces is to provide the necessary documents at the time of applying for a mortgage. However, with the introduction of special self-employed mortgage schemes, whether for refinancing or home purchase, they need not feel shunned or denied of home mortgage loans anymore. Self cert mortgages are beneficial to people who own small-scale enterprises or are self employed through any other medium, or have income from multiple sources or whose salary consists primarily of commissions or bonuses, or whose accounts may not show a true reflection of their earnings.

Another major problem is that lenders do not consider self employed borrowers as ideal or creditworthy borrowers. They are considered to pose higher risk than wage/salary-earners due to their unreliable or inconsistent income.

Following are some of the disadvantages of mortgages for the self employed:

a) They carry interest at a rate higher than the traditional mortgages.

b) Mortgage lenders demand a lower loan-to-value ratio.

c) Self employed borrowers have limited options to look around.

d) They have weaker power to negotiate for a lower interest rate.

e) There exists a serious conflict between the declared income for tax purposes and the actual income. A self employed would naturally deduct business expenses from his/her business income, so as to reduce the tax liability. However, this reduced income will not appeal to the lenders, who will question your ability to afford a home on the basis of such low income.

f) Mortgages for the self employed require a high down payment of approximately 20% or more of the cost of the home.
From the above points, it is apparent that a mortgage lender views a self-employed borrower as a high risk. The fundamental reason for the strict qualifying norms for mortgages for the self employed is the irregular and unstable nature of the borrower’s income. Prime borrowers have steady and verifiable income, backed by necessary documents, while a self employed borrower does not have a steady flow of income nor income proofs like pay stubs, etc.

Therefore, remember that if your application for a self employed mortgage is accompanied by your income tax statement, audited income records and a good credit rating, you will be in a better interest rate bargaining position. they need not feel shunned or denied of home mortgage loans anymore. Self cert mortgages are beneficial to people who own small-scale enterprises or are self employed through any other medium, or have income from multiple sources or whose salary consists primarily of commissions or bonuses, or whose accounts may not show a true reflection of their earnings.

For more information, you may contact:
Allegro Mortgages Corp. – Best Broker for All Your Financing Requirements
(416) 987-0008

Check out www.amortgages.ca for more information on different refinancing options.

Author Bio: Please visit the website Amortgages.ca if you are interested to learn more about mortgage for self employed. The site also provides valuable information about mortgage Toronto and mortgage Concord.

Category: Finances
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