Would salary sacrifice scheme lower the amount I coud borrow?

Phil3822

As the title suggests. I am considering entering into a salary sarcrifice scheme with work for child care vouchers. I am however worried that when I come to remortgage next year it would show my wage as a lower amount and therefore affect what I may be able to borrow.

My mortgage is £77000, house value is around £115000 now. My current wage is £28930.
I would need to sacrifice £2080 of my salary.

I am on a sub prime fixed mortgage at present although when that ends Feb 2012 my credit file will be clear of all diverse data.

Hope this makes sense and someone can advise.

Thrugelmir

Every lender will have a method of factoring in a dependent for calculating mortgage affordabilty.

property.advert

I asked this last year and the consensus was that for pure multiples, it was not a consideration as your headline salary is unaffected. For affordability, it is a factor as it is an expense.

However, I'm guessing your mortgage costs will reduce as a prospective lender will see you paying out say £800 whereas if they were to offer you the same loan it could be only £500. Thus your free cash flow would increase by £300 per month.

You need to make sure that you have as few outgoings as possible. Remember that they may want to see bank statements but they are not forensic accountants.

Procrastinator333

I had a chat with HSBC about this recently. The following was my understanding. They use both your notional salary (before salary sacrifice) and your net pay. So if in the prior year you didn't salary sacrifice, but spent £300 a month on childcare, they would have factored that in. If this year, your gross after salary sacrifice reduces, but your net pay remains the same, that would not change what they would be willing to lend.

It is having the dependant that reduces your borrowing capacity, not the method with which you pay for childcare. So I would be surprised if it does make a difference. However the quickest and most accurate response would surely come from a phone call to your lender? Though maybe follow that up and get something in writing to be sure.

TrickyDicky101

In my case, Nationwide took my reference salary (ie before effect of salary sacrifice) when determining amount I could borrow.