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  • FIRST POST
    Jaxxb
    Will salary sacrifice impact mortgage amount?
    • #1
    • 3rd Mar 08, 1:37 PM
    Will salary sacrifice impact mortgage amount? 3rd Mar 08 at 1:37 PM
    Hi,

    My partner is the only one working at the moment as I'm looking after our 3 children at home. My eldest is now old enough to have the child care vouchers but we could also use the salary sacrifice scheme whereby we don't pay tax or NI on the first 200'ish pm child care. Are childcare costs are about 400 pm at the moment (this includes the vouchers) would the mortgage company take this expense into account when offering a mortgage amount? We have no debts or bad credit history?

    Thanks
Page 1
  • Lurkio
    • #2
    • 3rd Mar 08, 1:48 PM
    • #2
    • 3rd Mar 08, 1:48 PM
    I think it will.

    My 'official' gross salary is my actual gross minus the salary sacrifice (as the name suggests), so I would say that the lower amount (after ss) is the one you will be giving to any mortgage broker on which they will base any mortgage offer

    HTH
  • evi3000
    • #3
    • 3rd Mar 08, 1:57 PM
    • #3
    • 3rd Mar 08, 1:57 PM
    I have to disagree. I sacrifice part of my salary for the childcare vouchers (243 pm). I have just applied for a re-mortgage (and been accepted) and put my salary as the gross total before salary sacrifice. I have had no problems whatsoever.
  • Dick here
    • #4
    • 3rd Mar 08, 2:00 PM
    • #4
    • 3rd Mar 08, 2:00 PM
    By doing a salary sacrifice your net pay is actually higher because you pay reduced NI, that's the appeal of it. Therefore, you should put down your normal gross salary for mortgage purposes.
  • InMyDreams
    • #5
    • 3rd Mar 08, 2:01 PM
    • #5
    • 3rd Mar 08, 2:01 PM
    Yes, I believe this is a downside of salary sacrifice. It's why it is a 'sacrifice'. I was under the impression that it can also have final salary pension implications too if you are too close to retirement. (I guess not likely if your eldest is only just 3.) Basically you are sacrificing your salary for the vouchers, and all that goes with having that higher salary. You have to make sure that the 'perks' (eg childcare vouchers/company car/whatever else you can sacrifice salary for) are worth it. At least that's how it was explained to me, but I may be wrong.

    Are childcare costs are about £400 pm at the moment (this includes the vouchers)
    Originally posted by Jaxxb
    Which vouchers do you mean? Do you mean the vouchers you get with the salary sacrifice scheme? So your childcare costs are £400pm over and above the free sessions and you are wondering whether to sacrifice some salary to bring down the £400? That seems like an awful lot to be spending on childcare if you are not working. Is there a reason you are not working but cannot look after your children? Studying?/Illness?/Disability? Maybe there are other avenues to find help towards childcare costs? If it is because you are actually working part-time, then claiming the salary sacrifice vouchers for childcare costs may also have an impact on your childcare element of WFTC.
  • Jaxxb
    • #6
    • 3rd Mar 08, 4:26 PM
    • #6
    • 3rd Mar 08, 4:26 PM
    Yes, we have the free sessions and then its about 400 I think (we use 5 full days a week) shared between my eldest who's 3 and a half yrs and my son who is 2 and a half yrs. I was getting too stressed out looking after them at home and was becoming very unhappy so we decided to take the financial hit. We get about 400 child tax credit pm although that will reduce next month as my youngest will turn 1 so it kinda all balances up really, its just we need a mortgage of around 65k, my partner earns 21kpa so its a bit tight. I could go back to work but I don't think we'd be any better off and I don't feel my baby is ready yet to be in a nursery.

    I wanted to apply for the salary sacrifice straight away as we can back date it by 6 months but for no longer and we are nearing that deadline. We could wait but we haven't even found a house yet let alone a mortgage! Just thought someone might know as i haven't found a mortgage adviser yet either.
  • dwsjarcmcd
    • #7
    • 3rd Mar 08, 7:36 PM
    • #7
    • 3rd Mar 08, 7:36 PM
    I looked into this for my employer in relation to salary sacrafice with Pensions. If worked correctly by your employer it will have no impact. Your employer will effectively have 2 salaries for you, 1 for tax purposes and 1 for this type of thing and, for example salary increases.

    If you think about it, no-one would salary sacrafice if was was going to impact on pay rises, final salary pensions etc.

    Your employer should give you a salary reference based on your gross salary

    David
    Last edited by dwsjarcmcd; 03-03-2008 at 8:09 PM.
    • MortgageMamma
    • By MortgageMamma 3rd Mar 08, 7:50 PM
    • 6,012 Posts
    • 2,955 Thanks
    MortgageMamma
    • #8
    • 3rd Mar 08, 7:50 PM
    • #8
    • 3rd Mar 08, 7:50 PM
    Some lenders will deduct childcare costs on an affordability calculation if you disclose them, some won't. It all depends on the lender but my take on this is if your salary sacrifice is for tax savings then you should declare your true gross salary.

    There are also other ways around this, for example if you are purchasing or remortgaging there are lenders who don't bother to check your income if you have enough equity. usually 10-15%. I'm not saying you should do this, its just ONE hassle free way around it.

    MM
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Jaxxb
    • #9
    • 3rd Mar 08, 10:08 PM
    • #9
    • 3rd Mar 08, 10:08 PM
    Thank you all for responding, I think we'll probably do the salary sacrifice and then see how much we'll be offered when the time comes (after all it could be a while yet and it sounds like there might be ways round it if its a problem)
  • lynnexxxo
    On my payslips there is my gross salary and te childcare vouchers are in the same column as te tax and NI. Therefore any mortgage folks will see your gross salary.

    Are you aware the max in vouchers is 230 per month. Also, are you sure you can backdate them? Surely your OH will have had his salary so would have to pay back 230 X 6 to his company in order from them to give him 6 months worth of vouchers.
  • Jaxxb
    Our monthly childcare fees come to £505.27 minus £106.88 which is the credit for the free time for my 3 and a half yr old. Then we can salary sacrifice £243pm (ie not pay tax or NI on this amount). I'm sure I read on the Govt websit about this or maybe even on Martin's that you can back date it six months. Anyway will give it a go!

    Nothing shows on my partners wage slip at the moment - its all done by the Nursery and they give us an invoice. I don't know how the back dating bit would work, on my partners wage slip there is mention of salary after sacrifice but its blank at the moment.
    Last edited by Jaxxb; 04-03-2008 at 11:26 AM.
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