Non-taxable income

oranges7

This is gonna be a long one sorry in advance...

We are looking into the financial possibilities of relocating to a different area but have come up against a problem or two.

Current situation

Our current house is worth ~£225-230k (although we expect to actually get £210k for it).

Mortgage = £167k (4.79% fixed with 3 years more to run- A&L)

House we want to move to

New house £240k

Assuming 10k moving costs (stamp duty, solicitors fees and EA costs) we'd need a new total mortgage of ~205k

Now, for obvious reasons we do not want to lose our rate with A&L (nor do we want to pay the exit fees!). So if we got a seperate mortgage with A&L (with a new interest rate) for the ~40k extra we need then we'd be fine.

HOWEVER! We run into problems because I do not have an official wage. Husband works a regular job (46.5k+ 6k bonus), but I'm doing a PhD (funded). I get a stipend (or 'wage' to me and you) of £12,600 a year BUT this is net of tax, stipends aren't liable for tax.

A&L will not regard this income at all, if it's not liable for tax they won't consider it and thus will only offer us a total mortgage of 185k. £12,600pa net is approx £16,500pa gross, which if they considered it would allow us to borrow the extra £40k. I have 2 more years (guarenteed) of this funding left.

The guy at A&L offered to send our request to their underwriters but he made this sound like we wouldnt have a chance in hell anyway. Infact he said something along the lines of "bursarys [its not a bursary] are for completing your studies not buying houses":rolleyes: . How patronising. What is involved in sending the request to an underwriter?

I just don't understand it. My SIL got a mortgage on a wage from her TEMPORARY MATERNITY COVER job as the main income providor!!! Mine is guarenteed for 2 years (how many people KNOW they wont get made redundant in the next 2 years?), yet I am more of a risk, even as a second income.

I feel like a leper right now just because by income isn't called a "salary".
Oranges.

morg_monster

I know what you mean. I'm about to start a PhD (currently working ft) and we are also looking to buy our first home in the next year or so. I have heard some places are more helpful than others when it comes to studentships; I seem to remember on a postgraduate forum seeing HSBC as an example of this, but that was a post from at least 3 years ago so things may have changed.

We were thinking about getting a guarantor mortgage - is this a possibility for you? I don't know how the current crunch has affected this type of "non-standard" mortgage but suspect it is not favourably. Also it seems a pain to probably jump through a lot of extra hoops when you only need it for an extra 40k. In the end after a suggestion from someone on this site we think we'll probably only use my OH's income to get a mortgage and fortunately my dad has said he can lend us some money to make up any shortfall; but should only be 10-20k.

Think you should probably get an appointment with a broker and see if they have any suggestions. Are you in a university town? Local advisors may have come across this problem before.

morg_monster

Oh and you should ask the A&L advisor how a student is meant to complete your studies without a roof over their heads?! It ought to be used to rent, at least, so why not for mortgage payments?!
One other thought do you do any work that is taxed? teaching, or marking? Might help the shortfall but probably not, since joint applications usually have a lower multiple.

oranges7

Thanks for your reply. We are not prepared to ask my parents to be guarantors, besides the fact that it complicates relationships in my opinion, we earn more than them anyway (even if i discarded my income)- so I doubt it'd be of any use. None of our family are in any position to have thousands of pounds lying around in their bank ready to lend to us (not that i'd want it from them).

I have heard that HSBC are more flexible (we have our current accounts with First Direct so I guess it would be very easy for them to see that we DO have this money coming in every month and can easily afford it). I have heard that you cant have two mortgages from diff lenders on the same house though. Changing the whole mortgage to HSBC would cost thousands in exit fees and the loss of our very low interest rate.

Has anyone actually put their case to an underwriters?

Gina

I'm not sure about having two mortgages with different providers on the same house, but I'm starting a PhD in October and I've just been accepted in principle for a mortgage with HSBC. I've been to a few different banks and through a broker and they all said no because it wasn't a proper wage, but HSBC didn't have any problem and said 'they treat all their customers fairly'.

I was starting to lose hope before I went to see them, I hope that's some help to you.

sdooley

You could sell your current house and rent in the new area?

happybroker

I've put plenty of cases to underwriters with varying levels of success.

Certainly you will be no worse off by doing this, the worst they can say is no which leaves where you are now. Much of this depends on how the case is "pitched" and other risk factors such as loan to value, time in job etc.

Will your OH's job stay the same with you moving to a different area? If so that won't help your cause I'm afraid. But I would say go for it, nothing to lose after all.

Cazza

Do you have any outgoings on loans or credit cards? What term do you have left to run on your mortgage and how old are you? Using the A&L affordability calculator, if you have no credit commitments and a 25 year term, the loan amount is £206,000. You might just need a bit of "tweaking"!

TBH, with the stipend, I've asked a number of lenders this question in the past and that's the usual reaction I've got. The general attitude is that if the money isn't liable for UK tax, then it can't be used.

oranges7

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oranges7

happybroker wrote: »

I've put plenty of cases to underwriters with varying levels of success.

Certainly you will be no worse off by doing this, the worst they can say is no which leaves where you are now. Much of this depends on how the case is "pitched" and other risk factors such as loan to value, time in job etc.

Will your OH's job stay the same with you moving to a different area? If so that won't help your cause I'm afraid. But I would say go for it, nothing to lose after all.

He has been in his current job for 2.5 years, I've been doing my PhD for 20 months or so. He has no problem with keeping his current job should we move, infact it would be more convenient for him. He is currently considering a move to another company (for a ~20k increase in base salary) although I am not assumign this will happen. Then there would be a trade-off between the salary increase and less time in job?

Cazza wrote:

Do you have any outgoings on loans or credit cards? What term do you have left to run on your mortgage and how old are you?

We have a cc at ~£2500 (0% of course!) which was used for a new bathroom. We have a strategy to pay this off within the next couple of months so it may well be gone by the time we apply for a mortgage (although I felt I had to admit it to A&L on the phone!).

We have 23 years left on our mortgage currently (we are 2 years into a 5 year fixed deal) and I am 24. We didnt want to increase our mortgage term back to 25 years if we could help it.

However, we had a chat last night and considered upping the mortgage term just to achieve the figures but overpay it to bring it back down to 23 years. Then we couldnt work out whether they'd allow us to extend the existing £167k mortgage that we have. It all gets a bit confusing when there are 2 'portions' of the mortgage.

Toughluck

The £167K will have to stay as it is, nothing is allowed to change.

I though A&L used affordability in their calculations and seems a little stingy from them to not lend £207K on single income of £46500 basic. If the have come back and said £185K, getting it overturned to increase to £207K is a big ask. Maybe £5000 increase they would do, but that jump is unlikely. As I sadi I am not sure why they won't lend you that amount.

I would generally not consider using your income if you came to me for a mortgage unfortunately so you need to at worst case right that bit off.

I have had lenders (Accord) accept bursary once before but that was a one off. Your stipend is not a million miles off from this.

If they don't budge, the only option you have is to not buy or paty the ERC and change lenders. Depends on your motivation of what you want.