Why do lenders need proof of income...

LizEstelle

.... if you can prove outgoings?

I have bank statements which show very clearly my current mortgage payments.

As these are currently much higher (and have been for well over a year) than the monthly payments which most new lenders are 'offering', then why on earth can these new lenders not accept that this is proof positive that I would be able to keep up with the new mortgage - especially if it is at a fixed rate?

AndrewSmith

Because you are asking them to 'lend' you a considerable amount of money.

They know nothing about you or how you conduct your affairs. It is very reasonable and should be taken forgranted to be asked to prove income by way of payslips, p60, employer reference etc.

Just because you can afford the current payments doesn't mean that, for example, you are not under notice of redundancy or even working at all.

If you have nothing to hide from the lender then why is it an issue?

LizEstelle

Indeed, and my counter-argument that proof of being in paid work today is absolutely no guarantee of this being the case tomorrow is equally valid, wouldn't you say?

AndrewSmith

LizEstelle wrote:

Indeed, and my counter-argument that proof of being in paid work today is absolutely no guarantee of this being the case tomorrow is equally valid, wouldn't you say?

What you or I think is actually Irrellivent. The lender reserves the right to ask for whatever information it see's fit to make it's decision. It's called responsible lending. After all, who would you blame if they loaned you more than you could afford to pay?

If they ask and you won't give, they simply won't lend.

I can't see why you would object to providing proof of income when applying for something liek a mortgage which is based on income etc?

LizEstelle

AndrewSmith wrote:

If you have nothing to hide from the lender then why is it an issue?

It's an issue because any borrower may:

1. Not particularly wish for his/her sources of income to be divulged to others.

and

2. Not particularly wish for the sources of his/her income to know that he/she is having to seek a mortgage.

Two fairly reasonable attitudes, I would have said.

I would also have said that consistent proof (via bank statements) of being able to meet a higher level of mortgage payment than that required by the new lender is worth more than a bunch of payslips. As has been mentioned, those would be no guarantee whatsoever of continuing employment over the term of, say, a 5 year fixed rate - or even past tomorrow.

furndire

Basically - its their money they are lending you -so they call the shots.

LizEstelle

furndire wrote:

Basically - its their money they are lending you -so they call the shots.

Yes, I do appreciate that. However, the point I've been trying to get across is that proof of INCOME constitutes no grounds for believing in any particular ability to PAY. Different people do different things with their income. Some are far more wasteful and careless than we moneysavers! If I wanted, I could gamble away all my income each month or I could live like a church mouse and keep the vast bulk of it - or anything in between.

I'm just asking if anyone knows why lenders seem to turn a blind eye to proven track records as regards previous payments and insist on this monotonous and somewhat dubious 'payslips, payslips, payslips' mantra.

Payslips are scant proof of anything. In the next month, 100,000 people in the UK will lose/change jobs or undergo promotion/demotion.

regularsaver1

The thing with a bank account is that anyones wages can be paid into there as well as a cash - and so this does not show affordability for that sole person

also there are other commitments which would if you have them, reduce your income such as loans and credits cards

if you can't provide payslips, most will except an employment reference. also not all lenders will need proof - but this often depends on the loan to value

The lenders have their own affordability criteria which must be met. they are being resposnsible by asking for proof.
some lenders use an affordability model, which depends on the term of mortgage, if you have dependents ect

Gorgeous_George

Just can't please some people. Lenders are slated when they lend irresponsibly and again when they try to lend responsibly.

I assume the OP's income is illegal or from a dubious occupation.

The lender has a right to gather information in order to assess the application.



GG

regularsaver1

I agree with the top part in your post GG, but not the middle as we can not assume that really can we.

Gorgeous_George

I think we can assume whatever we want given that there can be no valid and legal reason not to divulge income to a lender. Without the information, assumptions are all that the lender can use.



GG