Self-certification mortgages

About 14% of the UK population is self-employed and Alodis, an organisation that offers advice to people who are self-employed, predicts that, over the next 10 years, there will be about 3.2m in this position.

Many self-employed people are earning big money. But, if they want to buy a home, they are likely to come across a big stumbling block - standard mortgage lenders tend to be extremely suspicious of anyone who cannot prove their earnings via pay slips.

A self-certification mortgage is a mortgage offered on the basis of you stating what your likely income will be, rather than providing documentary evidence. But you may have to ask an accountant to back up your statement. If you have more than two - and, in many cases, three years' worth of accounts, then you should be able to apply for a standard mortgage.

Self-certification mortgages fit under the so-called non-standard banner and there are around 15 lenders in the market. The market is becoming more competitive and deals are therefore improving. You are still likely to pay more, but there should still be the opportunity to switch to a better rate - and, often, another lender - a few years down the line.

You are asked to pay a higher rate because statistics show most businesses fail within the first two years of trading. And if you are left with heavy debt there is a possibility you could lose your home.

However, some self-certification mortgages are better than others, and, if cash flow is a problem, it's worth checking out those that offer payment holidays and the facility to pay more when you can. It may well be worth seeing a broker, as they can explain any intricacies, but be sure it is a reputable firm and regulated under the mortgage code.

Whereas standard mortgages typically offer a 95% loan to value, self-certification mortgages almost always require a higher deposit: a loan-to value of 90% and, more commonly, 75% is usually offered.