FTB - will small second income help affordability?

MelissaW_2

Hi everyone,

Single first time buyer in need of a bit of advise. I'm planning on getting a broker, but any info now would be great.

I've been plugging my numbers into various 'affordability calculators' for different lenders online and I'm finding the amount they'll lend isn't what I'd hoped post these MMR rules.

My regular income is okay, £40k, but as a single person they don't want to lend out much. In the past I'd always skipped past the 'second job/income' criteria, but I actually do casual work outside of my regular job and my question is really, will this help at all?

The amount I earn isn't a lot and varies greatly each year with no way to predict future income. However, the last year was really good and i'm about to pay about £4k in tax on that, so I guess I'll have to explain the 2nd income, even if there's no benefit to me, to explain why I had to give HMRC that £4k?

I've only been earning with this 2nd job for the last 2 tax years, the amounts earned were roughly:

2012-13 : £2,500
2013-14 : £10,000 (and now I have to pay about £4k to HMRC in tax)

Really my questions are:

• Will these 2 years extra income make any difference to how much they'll lend me?

• My bank statements are about to show £4k going to HMRC (for tax), will that cause problems/need explaining?

Any advise around having this casual second income would be appreciated, be in what kind of documents I might need to give as prove of income (from the tax man?) or if it's a waste of time and will change nothing.

Thanks everyone,

Mel

Thrugelmir

Much could depend on the nature of the source of the second income. There's a vast difference between the 2 years incomes.

pmd123

If you could detail how much you are hoping to borrow, it'll probably help people give you more relevant advice on this.

ethank

Most lenders have a requirement to have been working in a second job for a defined period of time.

The fact that you are going to make a large payment to HMRC in tax, would appear to suggest that you are not paying tax PAYE (Pay as you earn) - this would suggest self-employment - which may make it more difficult to recognise the income.

MelissaW_2

Hi all,

thanks for the comments.

I'm on a very stable PAYE job, have been there for over 10 years and this is where the main £40k a year comes from.

The second income, which is only a recent thing (2 tax years) came about mostly because an old colleague started a business and has been giving me work. The amount of work he's passing me has grown as his business has grown, hence the amount I've earned raised quite a lot from the first to second year.

This second income is dealt with as self-employment (sole trader), as it has to be that way for me to correctly pay tax.

I'm hoping to borrow about £170k, as I'm buying in the South East and prices here are a little crazy.

Looking at different lenders, I'd say the average they'll lend based on JUST my £40k PAYE seems to be around £130-140k, though some like Santander seem to offer much more. This is why I'm enquiring about the second income and if you guys think it'll make a difference with most lenders, or if it'll cause problems.

Thanks for all your comments so far,

Mel

pmd123

I earn around £40k, have about £8k additional income, and have just had my offer on a mortgage for £178k, so I would expect this is doable, if everything else is ok (credit reports, not too much credit elsewhere?).

I got turned down by Halifax, but then accepted by Natwest (my own bank) but it may be better going through a broker to save you the bother of hunting around.

What deposit do you have? and are you looking at help to buy?

MelissaW_2

Hi all,

The basic tick-box of things like good credit, no debts, no big expenses etc should all be fine, nothing to cause issues there.

I have about £35k deposit of my own money.

I'm not looking into Help To Buy as I don't like the idea at all, plus I think it counts against affordability, though I could be wrong.

Interesting that Halifax turned you down, I've seen generally low responses from a lot of lenders including Halifax.

Natwest I'm unsure of, as their affordability calculator is rather basic and seems to have one box for all outgoings, but I can't determine what they want to include in that - food, utilities, council tax, service charges etc?.

I've never banked with Natwest - would that be an issue?

I bank with HSBC and Nationwide (savings). However, up until about a year ago my HSBC probably didn't look too great. Nothing bad, just a few trips into the agreed overdraft, but I've heard HSBC are hard to please anyway?

Nationwide should have looked at me very favourably as all they see is lots of savings going in each month, but they just don't want to lend out much (to me at least).

I plan to use the broker my sister used, he seems nice enough although when I tell him my situation and he says theres nothing to worry about, I get the feeling he's not 100% on these affordability changes.

Thanks again,

Mel