Affordability Calculator

chrislee2810

Hi,

Thanks for your help in advance. For the last 2 years I have earned 47k per year but I have had a decent year this year and I am on track to earn 100k plus. Now I have a meeting with my bank next week and they have asked for the last three pay slips, the last 3 months have been fairly well paid months. They show as £32000, £22000 and £9000 but historically it's about £4000 per month. My pay is heavily geared on commission, my basic is £19094. Do I just tell them that this is not my average pay, and how do they work out how much we can borrow if commission is involved?
The other issue is that my wife is self employed and her accounts show that this financial year she has earned £25k, last year she earned 17k and the previous year she earned 11k.

Also anyone also give me a idea of how much we could borrow?

Thanks

ACG

It will depend on the lender.

I think you will probably find you will need to provide P60s and declaring and using £100k probably isnt going to happen - although it may be a possibility depending on the finer details.

With regards to your wife, most lenders average the last 2-3 years accounts and use that figure. In this instance, a lender who averages the last 2 years would be ideal for your wife although you need to see how that ties in with your income also.

I would say you could lend around £270-300k. If you want to go above that then its probably worth speaking to a broker. In all honesty its probably not a bad idea to speak to a broker anyway to pre-empt the potential issues with the complications.

chrislee2810

Thanks ACG, we were looking at brokers and then we received a call from Halifax, for some reason they could see that I was looking at mortgages online. I think that because of the complexity of our pay we will probably get a broker. When Halifax phoned me they were throwing ridiculous sums of money that we could borrow, but the last 3 months that she was looking at were not the norm.

ACG

I dont know how true this is on a practical level with halifax but on their website it says:

If received weekly, monthly or quarterly, then latest 3 payslips/last quarterly bonus payslip.

http://www.halifax-intermediaries.co.uk/criteria/mortgage/default.aspx

Click on income types and then scroll down to overtime and bonuses.

Whether they or any lender does it or not. Bare in mind that you have only experienced the increase for a short period of time and that basing your mortgage on 3 months increased income is probably not the smartest idea ever...especially with rates expected to start moving upwards over the next 12 months or so.

chrislee2810

We were looking to borrow 200k and I planned on being completely honest as we do not want to put ourselves in a sticky situation. I would be much more comfortable using 50k as my salary as my basic is increasing next year.

ACG

In that case I think you will be fine with most lenders. Some do have issues for people who rely heavily on commission but I do not think you will have a prblem getting decent rates based on what you have said.

alchemist.1

chrislee2810 wrote: »

We were looking to borrow 200k and I planned on being completely honest as we do not want to put ourselves in a sticky situation. I would be much more comfortable using 50k as my salary as my basic is increasing next year.

They will assess the commission part separately from your basic salary (i.e the £19094). Depending on lender they can allow 50-60 % of the commission when considering affordability.

You can't just put down 50k as your salary.

chrislee2810

I guess I need to leave this one for the brokers lol

chrislee2810

I had a chat with HSBC and they said that they would be happy to give me a AIP for 68k lol. Obviously I told them that this was not going to even touch the sides as we are looking to borrow 200k, she seems to think that the underwriter should be able to overturn it and offer more. She has given me the green light to look at houses at 200k, for obvious reasons I will not be taking them up on it.

DandelionPatrol

It is probably worth mentioning - how much deposit do you have? The lower your Loan to Value, the better you look as a prospect

chrislee2810

Currently I have 30k in savings and will be 45k by the end of November.