Can you get a mortgage with no proof of income?
There used to be a time before the recession when there were mortgages without the need to provide any proof of income. This time has now passed and almost all residential mortgage lenders will require proof of income before lending to you.
There are still some mortgage lenders offering a mortgage with no proof of income, these are known as self-cert mortgages and are commonly found in Europe and accessible for Uk borrowers due to some loopholes in the Uk regulation for our financial markets.
By proving your income to the mortgage lender, the mortgage lender will know if you can truly repay the mortgage and ideally how much risk they may be taking with you. This may also allow the to properly adjust the product or APR they offer to you.
Most mortgage lenders will now require proof of income, this may include:
- Your bank statements
- Your tax returns
- A letter from your employer
- And your payslip
Proof of income is very important to mortgage lenders as they use this to determine what the maximum they can loan to you is using a multiple which is usually between 3.5 and 5 of your income.
Mortgage lenders also use your income to work out your true disposable income which gives them a clear idea on if you could afford your monthly mortgage repayments and how much breathing room you will have left for emergencies and any non-essential spending.
Self employed borrowers proving their income
If you are a self-employed mortgage applicant then proving your income may be much harder to do and finding a mortgage lender willing to give you a mortgage with no proof of income will be practically impossible. A self employed mortgage broker may be able to help you.
You may be a self-employed borrower if you are:
- An IT contractor
- A doctor
- A partner at a firm
- A sole trader
- A contractor
- A company director
With self-employed borrowers, mortgage lenders struggle to prove their incomes and typically you will need a self-employed mortgage broker to advise you on the mortgage lenders who may be able to lend to you based on the proof of income you can produce.
Most mortgage lenders who offer mortgages to self-employed borrowers will typically demand you provide 2 years worth of accounts as a minimum but there are some mortgage lenders that may consider less than 2 years worth of accounts.
Generally, the more you are able to prove your income the better chances you have with securing a self-employed mortgage.
Can you still get a self-cert mortgage with no proof of income?
Self-cert mortgages which don’t require you to prove your income are banned in the UK but you may still be able to get one from on overseas European lender but even this may not be the best idea.
In fact, the FCA issued an official warning about the risks of these self-cert mortgages.
What to consider when getting a self-cert mortgage from an overseas lender:
- You run an increased risk of losing your home through a home repossession if you fail to keep up repayments on your property.
- The FCA regulatory guidelines may not fully apply to this lender and hence you may not have much regulatory protection.
- You may be charged high product fees by the self-cert lender to access the product
- You will lose out on compensation offered by the financial services compensation scheme (FSCS)
- You will not be able to make any complaints to the financial ombudsman if anything goes wrong
- The self-cert lender may be hard to get in contact with when trying to manage your mortgage.
Some Uk based mortgage advisors may be able to offer you limited advise on getting a self-cert mortgage with no proof of income.
Their advice on self-cert mortgages will usually focus around:
- How to check for what fees you may be due on your self-cert mortgage
- How to check what the self-cert mortgage lender does if you miss a payment
- How to check what the repossession process looks like with that specific self-cert mortgage lender
How to get a buy to let mortgage with no proof of income?
Typically most buy to let mortgage lenders will require some proof of income(£25k minimum) but there is a handful of buy to let mortgage lenders who may lend without any proof of income.
You may be able to get a buy to let mortgage without any proof of income if you have other sources of income such as a redundancy, other investments, a portfolio of existing buy to let properties etc.
The buy to let mortgage lender may require you to provide evidence of these funds or evidence of them being available soon or your ability to liquidate them to repay your buy to let mortgage if necessary.
If you have a portfolio of buy to let properties and don’t draw income from them or any PAYE income then there are buy to let mortgage lenders who will simply request to see accounts for your properties to determine what sort of income they are making and what sort of income may be readily available to you.
What proof of income is required for a mortgage?
The proof of income required by various mortgage lenders will differ based on their lending criteria and the type of mortgage you are after.
If you are after a buy to let mortgage the proof of income requirements will be quite different from someone who is after a residential mortgage.
The same applies based on the type of repayment you plan to have with your mortgage. If you are after an interest-only mortgage the the proof of income might differ from someone who is after a standard repayment mortgage.
Most mortgage lenders will require the following as proof of income:
3 months Payslips:
Almost all mortgage lenders will require at least your last 3 months worth of payslips and two years of P60s although there are some mortgage lenders who will accept much less than this.
3 months Bank statements:
Almost all mortgage lenders will want to see your bank account statements for the past 3 months to cross-check the information you have submitted on your payslip.
Even if your mortgage lender doesn’t ask about this, it is very likely your mortgage broker will so they can store the information in their records to comply with any regulatory guidelines.
Not all mortgage lenders will require to see this but if you cannot provide your payslips then most mortgage lenders will require to see your employee contract and maybe a written reference from your employer.
The contract and employee reference letter will need to be signed and dated.
You may also be able to provide proof for any extra income you may earn such as:
- A bonus or commission
- A bursary or grant
- Pension income
- self-employed drawings (net profit/salary & dividends)
- Overtime or shift allowances
- State benefits (child benefit, tax credit etc.)
- Overseas income
If you are self-employed then the requirements to prove your income for a mortgage increase significantly and have to provide documents spanning over 2 years in most cases and in some cases even more.
Self-employed mortgages are classified as a specialist sector in the mortgage market and hence self-employed mortgage brokers will usually tend to provide the most specialist advice on a sector they know too well.
For a self-employed mortgage you will be required to provide:
Your self-employed accounts: As a self employed borrower you likely won’t have PAYE and those who have PAYE just pay themselves enough to cover the national insurance contributions and hence this isn’t enough. You will need to provide a detailed account for 2 years minimum.
You will also need to provide:
- SA302 or Tax year overview (taken from HMRC website)
- Full signed company accounts( if available)
- An accountant’s reference from a qualified and registered accountant stating your income. The reference should be dated and signed.
Do mortgage lenders accept bonuses as proof of income?
Not all mortgage lenders will accept bonuses as proof of income. If your income is predominantly dominated by bonuses or commission then speak to your mortgage broker and advise them of this.
Your mortgage broker will then advise you on which mortgage lenders may be the best for your case.
Some mortgage brokers will accept up to 50% of a bonus as part of your proof of income for a mortgage while others won’t.
There are also a few mortgage lenders who may accept 100% of your bonuses plus your basic salary as proof of income but you will need your mortgage broker to guide you towards these mortgage lenders.
Can you use your benefits as proof of income for a mortgage?
Again some mortgage lenders will accept some benefits as proof of income while others won’t. What benefits and what percentile of the benefit could be accepted as income will vary greatly amongst mortgage lenders and it is impossible to say what they could be at any possible time.
If your income is made mostly of benefits then you should inform your mortgage broker of this so they could advise you on a mortgage lender who they know accepts the majority of the benefits which you have and a high percentile for each.
Example a mortgage lender may accept child benefits but only up to 49% while another mortgage lender may accept child benefits but accept up to 90%.
The advise your mortgage broker may give you will depend on which benefit has the most income in it.
When using benefit income as a proof of income for a mortgage you should be careful to ensure the income you included can be backed up with your authority payment schedule and on your bank statements as regular payments if not your mortgage could be declined.
If the benefit income was recently approved then you should notify your mortgage broker or mortgage lender so they advise you on how you should declare your income.
The following benefits have been used as proof of income for the majority of high street mortgage lenders in the past:
- Child tax credit benefit
- Working tax credit benefit
- Child benefit
- Attendance Allowance benefit
- Pension Credit benefit
- Maternity Allowance benefit
- Severe Disablement Allowance benefit
- Widow’s Pension benefit
- Carer’s Allowance benefit
- Disability Living Allowance (DLA)
- Industrial Injuries Benefit (IIB)
- Incapacity benefit (IB)
Although mortgage lenders will accept benefits as a proof of income they may be some restrictions or criteria you must meet before they will accept the benefit.
Example: when receiving child payments and attempting to use child benefits as proof of your income for a mortgage, the mortgage lender may request to see a court order for the child benefits. If there is no court other then there are still mortgage lenders who will lend to you but they will want to see your bank statements for a prolonged period of time indicating that the child benefit payments have been paid over a prolonged period of time and should continue.
Most mortgage lenders will require to see your bank statements so they can cross-check the information you have provided on your payslip.
The reason for this is because fraudulent payslips can be easily produced online and to comply with their internal screening process most mortgage underwriters will request to see your bank statement as proof of income for your mortgage. They will usually request 3 months worth of bank statements.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.