Posted on 9 December 2013 by Lisa
I am in the process of applying for a mortgage, and would really appreciate some advice. The situation is as follows:
1) I am going back to work after maternity leave and will reduce my hours from February. This reduces my salary to the point that the bank will give me less mortgage than I need for the house I'd like to purchase (I've done the 2 scenarios with them, my full time salary gives me more than enough mortgage, but part time does not.)
2) My reduction in hours will only be temporary until the kids go to school, so a maximum of 4 years.
My question is - will they take it into account that my reduction in salary is only temporary, and therefore increase the mortgage they will offer me? If not will they take other income into account such as an employee share-save scheme that matures in 2014? Is there anything else I can do to increase the mortgage they will give me? I really don't want to lose the house, I've done all my budgets and know that it is affordable (even with increases in interest rates), but their system says no! Any advice appreciated. Thanks.
Many thanks for your enquiry, I appreciate the time it has taken for you to write to us.
Whilst I understand that you have worked all the numbers and deemed that the mortgage to be affordable, lenders will assess the case differently, as each one apply's varying affordability models and stress tests to ensure that a borrower can continue to make payments and meet the cost of living.
Lenders typically will have to consider your current income on the reduced as pay as that will not change for the next 4 years, which means that you'll need to be able to support the mortgage for the next 4 years on reduced earnings and that is a significant amount of time as far as they are concerned.
The employee share saving scheme you mentioned will mature in 2014 but if you sell the shares, it would provide capital not income, though you could use the funds to reduce the mortgage balance.
However, I would reiterate that every lender has a slightly different affordability model and apply different income multiples, I.e some lenders will radically reduce the loan you can borrow if you have children, while others will take a view or apply a more relaxed model. Most of the banks don't have any flexibility in their underwriting process, you either 'pass' or you dont. End of story.
However we do have strong relationships with lenders who manually underwrite, and can therefore judge an individual case on its merits, and I think it may well be this type of lender who would look more sympathetically at your case.
It would be worth speaking to us before making a final decision, to go through the figures in detail and see exactly what we can / can't do. If you'd like to do so please let me know and I'll arrange for one of our consultants to contact you.
More than mortgages, talk to me about:
Financial Protection | Investments | Personal and Corporate Pensions | Home Insurance
General Insurance | Valuations | Conveyancing | Wills | Home finders
Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.
We recommend you seek professional advice with regard to any of these topics where appropriate.