Why do lenders need proof of income...

djohn2002uk

Gorgeous_George wrote:

Apologies for jumping back in.

That £1,000 would be taxable I believe.

GG

Are you saying that if I earn £1,000 and pay tax on it and then give it to my daughter it should be taxed again?

Doesn't sound right to me.

homer_j_3

Im not 100% certain if there is a taxable amount from your daughters side but I do believe that you MAY have an annual allowance to gift money and if you exceed this then there could be tax implications further down the line.

I am hoping one of the IFAs will calrify this at some point as it is an interesting point.

djohn2002uk

There are people who are a lot better off than me, with kids at uni who could well be costing their parents £1000+ a month, (thinking, rent, living expenses etc), surely no-ones suggesting this is all taxable.
This sounds more like the " I assume the OP's income is illegal or from a dubious occupation." remark. And coincidently from the same poster.

homer_j_3

No I am sure there will be exceptions to the rules. I am no tax expert and it could be that the income does not have to be taxed but it is a consideration that needs to be made.

A mortgage lender will only normally consider money received if it is taxed as income, benefits provided by the state or income derived from an investment and that the investment is in the persons name who wants the mortgage

AndrewSmith

LizEstelle wrote:

QED

That was precisely my point. Indeed, you won't get a mortgage.

Payslips, payslips, payslips. Tra-la.

Exactly.

It is not a question of what we agree with or not. It is a question of what we have influence over and what is factual.

We cannot influence the decision process of a lender or the information they ask for.

If you cannot / will not divulge the nature and source of the income then the lender will decline you point blank.

I am not being harsh or having a pop at you, simply stating fact.

either accept it or not.

shellsuit

I want a £10K loan from the bank.

The repayments are £150 a month.

I show them all my outgoings (JUST outgoings) and say 'look, I can afford to pay all these so I can afford to repay this loan'.

If I do this, firstly, they can't see (Because I haven't showed them my incomings) that I can't afford the repayments really as I have nothing extra once I have paid all my other outgoings.

Secondly, OR, I have failed to tell them that half of my outgoings are paid by my partner/family member even though they are in my name so 'I' personally wouldn't be able to meet their repayments. They are lending to ME, so they need to see that 'I' can repay them.

Can you see how this would open upto allsorts of abuse and trouble?

I could understand if you wanted to know why they don't ask for incomings AND outgoings, (to make sure that I can actually afford to make repayments once other bills and debts are paid) but I don't understand why you would want to withold your incomings to them?

They need to know that YOU have enough income to repay the loan/mortgage etc so that is why they need this information.

Gorgeous_George

djohn2002uk wrote:

Are you saying that if I earn £1,000 and pay tax on it and then give it to my daughter it should be taxed again?

Doesn't sound right to me.

Not necessarily.

I believe income is taxable if your income exceeds your personal tax allowance. I would expect unearned income to count as income and would pay tax but I could be wrong.

I cannot find anything to support this POV on the IR website.

There are implications for IHT.

BTW, if anybody can give me a good reason why anybody would wish to borrow money without providing proof of income, I'll buy them a pint (1st person only ). I could give you many illegal reasons whythey would wish to do so.



GG

homer_j_3

because they cant afford it under any lenders normal lending criteria - Mine is a Hoegaarden

dwsjarcmcd

Probably one of the most ridiculous threads I have read! Lenders want to minimise the risks of default and are bound by 'responsible lending'.

Demonstrating you can afford the loan does not just rely on 'payslips' It does take into account all the things that have been raised i.e. other debt, children etc..

For whatever reason, the OP is hung up on a single issue, which as many have said is only one issue that is checked. They will check you exist but your logic suggests you walk into the lenders office and say 'here I am, therefore I don't need to prove I exist' and that's ok. Lenders can check what they want End of!

Carter_2

Sorry but this thread has so amused me. Very good advice given here by many posters but I think you are banging your head against a brick wall trying to explain though.