A non status mortgage is a specific lending instrument designed to allow individuals who are unable to establish normal income to qualify for a loan. This mortgage type was originally intended to provide loans to people who owned their own businesses or were self-employed in some other fashion. Recently, however, the qualifications have been expanded to those who earn additional income through a second job or by working at home, and individuals whose income can fluctuate drastically from month to month, such as commissioned salespeople.
Now commonly referred to as a self certification (or self cert) mortgage, the non status mortgage became regulated in 2004 by the Financial Services Authority, and the application requirements were changed at that time. Previously, a prospective borrower could apply for the loan without any form of financial disclosure at all. Understandably, this system became the subject of considerable abuse and a fair degree of fraud. New regulations now require that an applicant disclose their income before a loan can be approved, but proof of such income is still not required.
As you might expect, such loans are not generally handled by traditional banks and generic lending agencies, but are only available through specialized financial institutions and mortgage brokers. Correspondingly, the cost associated with a non status mortgage is generally going to be at least a bit higher than a traditional instrument. However, if you can establish your income through tax records or sales receipts, such loans can still be obtained for a very attractive price. As a general rule, the lender will require that the borrower supply at least 20% of the equity of the property being mortgaged up front. Although it may seem easy to exaggerate one’s income during the application process, It is vitally important that the borrower be completely honest about their expected income stream.
While it will generally be easier and more cost effective to obtain a traditional loan if possible, a non status mortgage may be the only option for some. Those who work freelance or have a ‘feast or famine’ income stream may have absolutely no choice but to pursue this type of financing.
