Mortgage Offer , pay cut since applying

spectre

To cut a long story short,
Applied for a mortgage declared salary and outgoings etc.
Have now got the mortgage offer.

Since the application I have had a temporary pay cut of 10% enforced by my employer for a period of 6 months.

Should i inform the lender of this ?

It is only temporary and I can still afford the payments of the original mortgage quite comfortably.

nw_man

There are 2 answers to this :

1/ the morally ( and most possibly, legal one ) : yes.
2/ the real world one.... why bother if you are ok with the repayments and its only temporary ?

Jacka87

I agree with the poster above, there is probably a legal reason so answer should be yes. However it could cost you the offer and you lose your dream home etc.

However I would be more concerned about the actual impact of the pay cut. You say you can afford it so long its temporary. However what if the employer cant give you the 10% back or lasts longer than 6months or go under because they cant cut enough costs in the current financial market, which they must already be struggling in as they are making wage cuts?

Would you still be able to afford it them? Just make sure you can sleep at night if things dont turn for the better.

spectre

thanks for the replies.

I know what you mean about whether it will last longer than six months, it might and if it does I would still be able to afford the repayments. Obviously i hope it doesn't.

My main concern would be whether the mortgage company would withdraw any offer especially once contracts are exchanged and 10% deposit has been paid to the solicitor.

silvercar

They can withdraw an offer at any time, if they find new information.

If you had the lower salary when you applied, would they have still given you this mortgage?

opinions4u

Since the application I have had a temporary pay cut of 10% enforced by my employer for a period of 6 months.

Your employer is under severe financial stress.

That means that your sole source of income is under threat of disappearing.

You shouldn't take out any additional borrowing, let alone a mortgage, in those circumstances.

Review the situation in 6 months time. Income may be more secure then and house prices may be lower.

Should i inform the lender of this ?

The legal and moral answer is yes. One of the potential outcomes of not doing so is that you could end up being prosecuted for mortgage fraud. Obtaining money by deception is not a good thing to have to declare when applying for credit or employment in the future.

It is only temporary and I can still afford the payments of the original mortgage quite comfortably.

How do you know it's only temporary?

Look, just because you've commenced a course of action (buying a house) doesn't mean that you have to go through with it. Take a rain check for 6 months.

sammyjammy

If you are still going ahead with the mortgage then you should seriously consider an income protection insurance, it sounds like redundancy is the next possible step.

Good luck

Sam

opinions4u

sammyjammy wrote: »

If you are still going ahead with the mortgage then you should seriously consider an income protection insurance, it sounds like redundancy is the next possible step.

Good luck

Sam

While I agree with you, do you honestly think the insurer would pay up if the policy was taken out after a 10% paycut was applied in the current climate?

Cazza

Yes, you need to inform the lender as this is information which is material to the application. If you fail to tell them and they find out at a later date, they have the right to withdraw the mortgage offer at any time upto the day of completion, even if you have exchanged contracts.

spectre

Your right im going to let the lender know the situation.

It actual states in the letter i got from my employer that is is a temp contractual change for 6months only & affects amount of hrs worked as apposed to the 10% cut,

Base salary will not change it will say what it always did on the salary slip, but the amount of hrs worked will reduce and effect the pay accordingly to the 10% level

does this make a difference?

Cazza

From the bank's point of view, probably not. They are interested in what you earn, rather that how long it takes you to earn it. The fact it is temporary is good from your point of view, but I think it is unlikely to make any difference to the underwriters decision. If the worst happens and they come back with a negative reply, it's always worth trying this as a point to argue the underwriters round - if you don't ask you don't get!