savings, pension, season ticket loan and affordability

Iulia

Hello. At the moment I'm saving £300 each month for various reasons - doing a monthly standing order from my bank account to my savings accounts and my child's account. When remortgaging, does the lender include this amount in affordability calculations or not?

How about my own pension contributions (£200) and my annual season ticket loan (£110)? - both shown on payslip. It it worth stopping my pension contributions several months before applying to remortgage? I could save the pension contributions for a while, and then make a lump sum payment.

The annual season ticket loan deductions will end in June 2018, before the remortgage date which is 1 August 2018. My employer agreed for me to work from home 2 days per week as of this month, so I won't take out another season ticket loan next year.

kingstreet

Savings & pension, no.

Travel season ticket loan, probably yes.

This will vary from lender to lender and will depend on the chosen lender's attitude to expenditure as a whole and travel expenses in particular.

Neutrinno

They will only look at the committed expenditure, so the season ticket would of been taken but obviously that is going to be stopped close to the time you remortgage.

Iulia

Thanks, so perhaps I'm better off just asking my employer if I can repay the loan early - say in December this year?

Regarding the pension, I'm confused, as there were some mortgage affordability calculators online that asked me to input pretax deductions from payslip (pension is pretax, right?)

kingstreet

It's impossible to give you 100% lender specific answers.

Most lenders ignore pension conts. Most lenders ignore savings.

If you apply in July to a lender which wants only one payslip and your season ticket loan isn't on it, you're fine. If you apply to a lender which asks for three months payslips, you'll have questions to answer about the loan as it's visible on two of the three...

We have a job because we know the nuances of different lenders and their criteria quirks.

Rich2808

When it comes to pension contributions some lenders do take these into account in their affordability calculations - HSBC group and Barclays do the Lloyds group and RBS/Natwest don't. Nothing is a hard and fast rule.

Savings will be ignored - as its not expenditure. A pension contribution cannot be access until age 55 or later so is expenditure.

Clearly season ticket costs are relevant - lenders can see where you live and where you work so its obvious you will have bigger commuting costs the further the journey.

These shouldnt be an issue for most people unless you are on the margins of affordability (e.g. low deposit or high LTV)

https://www.theguardian.com/money/2015/may/07/i-failed-to-get-a-mortgage-because-of-my-pension-contributions

Iulia

Rich2808 wrote: »

When it comes to pension contributions some lenders do take these into account in their affordability calculations - HSBC group and Barclays do the Lloyds group and RBS/Natwest don't. Nothing is a hard and fast rule.

Thanks. Are you sure re: Barclays? This text below is from their calculator (the intermediaries website):

"Other regular monthly commitments (please do not include pension contributions)"

In my case the pension contributions are completely voluntary. My employer contributes a certain %, I don't have to contribute anything, so I guess it's safer to stop them for a while. I have childcare costs which affect affordability.

kingstreet

Rich2808 wrote: »

When it comes to pension contributions some lenders do take these into account in their affordability calculations - HSBC group and Barclays do the Lloyds group and RBS/Natwest don't. Nothing is a hard and fast rule.

Savings will be ignored - as its not expenditure. A pension contribution cannot be access until age 55 or later so is expenditure.

Clearly season ticket costs are relevant - lenders can see where you live and where you work so its obvious you will have bigger commuting costs the further the journey.

These shouldnt be an issue for most people unless you are on the margins of affordability (e.g. low deposit or high LTV)

https://www.theguardian.com/money/2015/may/07/i-failed-to-get-a-mortgage-because-of-my-pension-contributions

The Barclays LAC specifically excludes pension conts now, as you can see here;-

https://resources.barclays.co.uk/mortgage-calculators/residential-affordability

kingstreet

Iulia wrote: »

I have childcare costs which affect affordability.

Not all lenders do that.

Iulia

Thank you all for the responses. I checked with my employer and I decided to pay off the season ticket loan early - it makes sense anyway, as I have recently started to work from home 2 days per week, and it's not necessarily saving me money anymore. Now, they have said the loan needed to come off my salary and it will be shown on the payslip, so I decided to do it next month, to make sure that 6 payslips before the remortgage are all clear. Maybe that's an overkill

Read a bit about pension as well and found 3 lenders who could potentially ignore my (voluntary) pension contributions even though they are shown on my payslip: Barclays, Santander, and Tesco. Am I right? I don't want to temporarily stop these if I don't need to.

I've also decided for now - unless a broker can convince me otherwise :rotfl: - that Barclays is my preferred lender for the re-mortgage. They have good fix 5-yr rates, ability to overpay and low-ish variable rate, so I hope they'll have my mortgage. Problem is, they appear not to take into account annual bonuses at all, unless they are over £10,000? That doesn't make sense at all to me, why in the world would they do that?

Final question, it appears that all of the above 3 lenders consider child maintenance and child benefit if they can be proven with regular bank statements or court order. Given that both child maintenance and child benefit will most likely stop after my child turns 18, is that an issue? My child is 8, so that's another 10 years to go.

Apologies for the length of the message and thank you in advance for all who take time to respond. This forum is invaluable.

Iulia

Bumping up.