Mortgage with childcare - is this right ???

freem17

First time posting as i want to clarify something before applying for mortgage.

Last yr my husband inherited some money which we were to use as deposit to buy a new house (approx £30k) we looked into the kind of house we wanted to buy £180k and with our income could borrow enough- However when we input childcare costs into affordability it reduced loads - so we thought oh well we'll wait till our child is in school and no childcare before we move - only 2 yrs away no big deal wed rather wait and get the house we want than any house.

However recently a friend of mine is buying a property putting down around £20k and house is roughly £165k - she and husband are similar incomes to us and also have a child in nursery - i was amazed they could get mortgage and was nosey as said when we looked into it last year because of childcare costs we wouldn't have been able to borrow enough and wonder how she could ?

Basically her answer was her advisor had only told her to input if the costs are show as deducted of wage slip as childcare vouchers (which they're not) as they are the only costs the lender factors in ?

Is this correct ? seems odd to me but if its right then we might be able to start looking too !! However thought id better check before we do anything otherwise it'll be a waste of time !

Thanks

ACG

Different lenders look at things differently.

It doesnt sound like what your friends advisor has done is strictly legit - but i could be wrong.

I have no idea what childcare costs are ( i have a feeling if you say then ill be backing out of wanting kids - nappies are a big enough put off :P ), but im presuming affordability wise you might not be that far off affording what your after.

Did you speak to a bank or an actual mortgage advisor? It could be that a different lender would offer you what your after.

POPPYOSCAR

Why would you even tell a mortgage lender about childcare costs if they are not deducted from your income?

To me that is like telling them you spend x down the pub each week or x on clothes!!

Your spare income you spend on what you like surely - you just choose to spend it on childcare.

freem17

thanks for your reply, to be faiir we didnt even see an advisor last year we put our incomes in a few online and calculators, husbands salary £23000k, mine £13000k, wanted to borrow around £145k putting down £35k, which seemed fine but then as soon as we input childcare at £500 per month !!! this is quite cheap compared to some ! it reduced what we could borrow right down to just over £100k so we thought definate no go and will have to wait ?

kingstreet

Typically, a lender's affordability calculator makes an allowance for dependents, like children. If you have a play with the Halifax version,

http://www.halifax-intermediaries.co.uk/tools_and_calculators/mortgage_affordability_calculator/default.aspx

you'll see what I mean.

There is a chance you could be penalised twice for the same expense if you declare childcare costs on top of the dependent cost I mentioned.

Worth bearing in mind, the likes of NatWest, Halifax, Abbey and to a certain extent Nationwide, have higher income multiples which may help you against the cost of dependents.

Many lenders will also allow you to treat child tax credits and child benefit as additional income, balancing the cost of childcare with the benefit designed to mitigate it.

ACG

Poppy - if you pay it from a bank account then when the lender ask for bank statements and sees fees each month to a childminder or nursery...you would just have wasted a search on your credit report.

What your after sounds like it might be just doable - depending on other outgoings. It could be worth you speaking to a mortgage advisor, they might come back and say there is nothing you can do for the time being but i think there might be some lenders who might look at you - although i think it would be quite tight.

freem17

POPPYOSCAR wrote: »

Why would you even tell a mortgage lender about childcare costs if they are not deducted from your income?

To me that is like telling them you spend x down the pub each week or x on clothes!!

Your spare income you spend on what you like surely - you just choose to spend it on childcare.

Erm maybe naive but if they ask what they are i have to tell them right ? I dont choose to spend on childcare i have to as cant go to work ! Surely they would see it on my statement anyway and say hmmm what are you spending £500 on every month ?

freem17

kingstreet wrote: »

Typically, a lender's affordability calculator makes an allowance for dependents, like children. If you have a play with the Halifax version,



you'll see what I mean.

There is a chance you could be penalised twice for the same expense if you declare childcare costs on top of the dependent cost I mentioned.

Worth bearing in mind, the likes of NatWest, Halifax, Abbey and to a certain extent Nationwide, have higher income multiples which may help you against the cost of dependents.

Many lenders will also allow you to treat child tax credits and child benefit as additional income, balancing the cost of childcare with the benefit designed to mitigate it.

Ive popped my details in and it comes up with £144k thats without factoring in childcare - although we do get some tax credits it will only be for another yr then i think we'll be over the threshold, but they seem to reduce your affordability much more for childcare than the difference tax credits make up - someone said natwest don't include childcare in there affordability but have v strict underwriting criteria ie if you've been in your overdraft even for a £1 its a decline ?! maybe I should see an advisor but i still think its seems like a no how did my friend manage it i don't understand - i'm assuming shes not actually declared it then ? but her lender has instructed a valuation on new property so i assume they've underwritten it and all is ok ?

kingstreet

You need a good independent or whole market broker. No estate agency advisers and don't expect to get anything other than the "party line" from bank staff.

If you are going to give up, at least do it knowing you've exhausted all your options first.