Tax credits/child benefit as income?

linnyp

Do many mortgage providers allow you to count in your child tax credits and child benefit as part of your gross income to calculate how much mortgage you can get?

MortgageMamma

yes, some do. some will accept 100% of working families tax credit but I don't know any that accept child benefit.

infobank

Alliance and Leicester will.
You will need to show a benefits statement or bank statement to prove you are in receipt of it.
You can get a decison from their web site here:

http://www.alliance-leicester.co.uk/home/index.asp

or freephone 0800 056 3254

Plenty of other lenders will also take child tax credit i.e. Abbey

AndrewSmith

Just remember that every lender you contact will carry out a credit check when you ask them to give you advice on how much you can borrow etc.

Each credit check is recorded on your file, and too many can have a negative impact on your credit score.

Andy

MortgageMamma

There are many other lenders that will take wftc as well as Alliance and Leicester, some are more competitive presently too. Make sure you explore all options and don't take what infobank said as a recommendation.

HelpWhereIcan

Please make sure that you do not confuse a lender accepting child TAX CREDIT with them accepting Child benefit. There are not many lenders who will accept Child benefit, and you tend to be looking at Halifax, Intelligent Finance, YBS and Accord (although there may be others depending on your circumstances). AFAIK, A&L do not accept Child Benefit although they do accept 100% of Child Tax Credit (they were actually one of the first to take all of it as I recall).

Where your application depends on income from a number of sources like this, I would argue that you need advice as it not only matters which incomes a lender will take into account but also what they do with it to work out how much you can borrow.

As Andrew says, if you approach a lot of lenders for a decision in principle, you may well end up with more credit searches being recorded than is neccessary.

Hope this helps

linnyp

Thanks for that. Seems a little ironic though that more places are willing to take tax credits than are willing to take child benefit as tax credits can be taken away depending on your income but child benefit cannot and is definately constant until your children are 16 or 18 whichever it is.

missmp_2

I Suppose If Your Tax Credits Go Down Your Income Wil Have Gone Up, So Its Swings And Roundabouts

MortgageMamma

I personally do not think you should ever include your tax credits in order to borrow more. what if they are withdrawn in future and you cant' manage the repayments. I been told by A & L that they accept the whole tax credit award for income purposes. I personally feel that, if they really must insist on adding it, that they should deduct childcare costs from the award and work purely on the WTC, however I'm told they do not do it this way.

HelpWhereIcan

MortgageMamma wrote:

I personally do not think you should ever include your tax credits in order to borrow more. what if they are withdrawn in future and you cant' manage the repayments. I been told by A & L that they accept the whole tax credit award for income purposes. I personally feel that, if they really must insist on adding it, that they should deduct childcare costs from the award and work purely on the WTC, however I'm told they do not do it this way.

They do actually go part of the way to doing this. Their affordability calculation will produce a lower maximum loan for someone with children than for someone without.

So, for example, if you were to put calculate the max available on a 25 year term for someone on a income of £20,000, you would find that the person with no dependants comes out at £109,000 and the person with 1 dependant (whose £20,000 income may include Tax Credits) comes out at £100,000. The figure is reduced even further by adding in additional dependants and plummets when you enter a couple with only one earner.

Having said that, my job as an adviser dictates that I make people aware of all the issues involved with taking on a mortgage and that includes how affordable a mortgage is taking into account their income and expenditure. I have found many times that there is a huge difference between the maximum loan I can get for someone and the amount they feel comfortable paying towards.

MortgageMamma

Likewise, there have been instances lately where I have actually had to tell the clients they cannot afford to borrow so much. Perhaps it would be a good idea for lenders to include dependants in the mortgage promise criteria to give clients a more realistic view (from the outset) of what they can afford to borrow. not come across one yet that does this. Do you know of any?

The problem is with house prices being as high as they are presently, some people are stretching themselves to the max to get on the ladder or move up the ladder, which I find really sad and worrying. There are so many people desperate to buy or move that can't.It makes you wonder what the situation will be in five years time.

Sorry for the rant, I have days like this!!!

L