Childcare vouchers warning - can affect mortgage applications!

lasjholl

We've been trying to arrange a mortgage in the last week or so, and it has been truly frustrating!

According to our mortage broker, the amount we need to borrow has been well within our affordability range. However, when he faxed off copies of our monthly payslips, which show our childcare vuchers being taken from our wages before tax, Nationwide rejected our application on grounds of affordability.

When he looked into it further, the broker found the lender was treating the childcare payments as a regular debt; like a loan, or CSA payments.

The baffling thing is, the voucher scheme actually saves us about £180 a month in tax, so should affect the real affordablity of a mortage favourably. Of course, Nationwide weren't interested in hearing any explanations!

So, because of the short-sightedness of Nationwide (and, I suspect, many other lenders) we missed out on the best deal on the market. Feels unfair.
Fortunately, C&G are quite sensible, and offered us the mortage we need at only a slightly higher rate than Nationwide.

So, if your childcare voucher sacrifice appears on your payslip, and you are planning to apply for a mortgage in the future, it might e worth bearing our experience in mind.

betmunch

This is a known problem with a number of Lenders, it shouldnt be news to anyone in the industry.

When checking affordability on a lenders website they should ask the broker if you pay out for childcare vouchers and, as you said, it will be considered a regular commitment.

I agree with you that its wrong, but I guess these lenders have just been stung to many times by people NOT declaring childcare costs when they are paid out after tax.

luckyfool

Why is it wrong? The childcare is a regular commitment, if they were not using the childcare vouchers then with most lenders they would have to declare the outgoings on the affordability calculator anyway, and the reduction in available income/affordability would be even greater due to the loss of tax benefits. Its not as if the childcare is optional that the applicant can decide to stop on a whim like their Sky TV or gym. Often if nursery is stopped it means Mum (or Dad) has to give up work or drop hours, meaning the income goes down.

Lenders are just being responsible by taking these outgoings into account when verifying that you can afford the mortgage based on your outgoings. Nationwide are hardly the most flexible or generous lender in terms of their multiples, it should be relatively straightforward to find another lender that will definitely help.