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What Are Non-Status Mortgages?

Jun 3, 2008
Non-status mortgages are designed for people who either cannot prove their income or who suffer from adverse credit. "Non-status mortgages" is a term that is loosely used to describe all home loan products that are not standard high-street products.

Non-status mortgages for self-employed workers are also known as "self-certification mortgages". This category of home loan products require individuals to state their income to the lender without having to provide proof in the form of pay slips and other records of earnings. These products are designed this way as self-employed individuals do not get pay slips and P60s from employers in the same way that employees do.

Self-certs usually require the borrower to fund a larger deposit that for standard mortgages. This is usually in the vicinity of twenty percent. They are also known to attract slightly higher interest rates than standard home loan products. In recent years, however, with non-status mortgages becoming increasingly popular, the interest rate disparity has reduced. This is also because there are a larger number of lenders who offer such products so the market has become competitive.

Borrowers who suffer from adverse credit may also apply for non-status home loan products. Adverse credit mortgages are a different type of products than self-certs however they normally still require a deposit and attract premium interest rates. This is because borrowers with credit impairments are regarded as a higher risk by the lenders.

The amount of interest charged on adverse credit home loans will depend on the type and severity of credit impairments the applicant has on their credit history. Light-adverse applicants may only be required to pay a slightly higher interest rate than borrowers of standard mortgages, while heavy-adverse applicants may be required to pay an interest rate several percentage points higher than people with a clean credit file.

The non-status mortgage market has expanded considerably in recent years and borrowers can now choose from a full range of variable rate, fixed rate, capped rate, discount, and flexible mortgage products. This is due to the fact that the demographics of the general population have changed considerably over the past decade meaning that fewer people than ever before qualify for standard home loans.

There are more people than ever before working on a self-employed basis and who are unable to fully prove their income with pay slips. There is also a large, and growing, portion of the population who are subjected to some form of adverse credit on their credit files. Mortgage lenders are therefore being forced to take notice of the market to ensure they do not lose their customer base.

If you are looking to apply for any type of home loan that is not considered to be a standard high product street, contact an independent mortgage adviser for impartial advice. There is a wide range of products available so it may be a good idea to let a mortgage broker walk you through the maze of options. Some brokers may charge a fee for their services however it could be worth it if they help you choose the right product to suit your needs.
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