Why do banks only accept part of my income as 'income'?

Rositree

Hi,

I work two part time jobs as a care worker (and a couple of other ad-hoc, zero hours gigs, but we can ignore those for now) and have a couple of lodgers using the rent a room scheme (£7500 tax-free 😀), good credit rating, no debt apart from my mortgage, yet when I tried to release some equity in my house I was told 'computer says no' by my current lender (Lloyds) and other banks wanted to see my employer's accounts, even though they aren't self-employed, and wouldn't even consider me.

The issue seems to come when they see my payslips detailing: Weekday hours, Saturday hours, Sunday hours and Sleep-ins - care work being a 24 hour kind of job.
My contracted hours are one weekend in four (10am Friday until 10am Monday) giving me a gross monthly of £829. The hourly rates are different on a Saturday and a Sunday but those days and the Sleep-ins form my regular shifts and I have chosen to receive my holiday pay entitlement in the wages at 12.07% as I would usually fit holiday into the other 3 and a half weeks around the weekend shift and not be absent from work which is fairly common in these kind of jobs.

However, the default from mortgage provider is that Sleep-ins and weekend hours are considered overtime, not guaranteed and they only add 60% to my income. This takes my £829 gross/4 weeks (~£10500pa) down to something like £147 + £410 'overtime' (£682x60%) which is only ~£7370pa. Which obviously has a huge impact when scaled up 4x for a mortgage application. My boss provided a supporting letter last time stating my contracted hours, gross pay and explaining the holiday pay add on but to no avail - after sitting through 3 hours of meetings with the mortgage adviser and him seeming to understand my shift patterns he still couldn't come up with a legal way of entering the data that would allow for the common sense approach (and, true reflection of my income).

The other job is more straightforward, with a flat pay rate but I've only been in it for a few weeks and the hours are fluctuating due to having to get trained and covering someone else's sick days but I should be doing one day a week regularly in future @ £100/day so £5200 pa.

So I'm earning £16000pa from two contracted part time regular jobs, plus £7500 from lodgers and the adhoc jobs pay for my frivolous spends (if I don't work those, I don't do fun stuff) and the rest goes on expenses and savings. I've got my head screwed on when it comes to budgeting and follow lots of the :money: tips on here...

Why do the banks make it so difficult to borrow extra? (I have a £67000 mortgage on a £160000 house due to overpaying in the beginning of the term). It seems like if my payslip wasn't so informative, they wouldn't care and would just copy the total figure.
Does the fact that I have two jobs make me more of a risk?

Any mortgage brokers out there who can shed some light on this, it'd be much appreciated!

I look forward to hearing your thoughts,
Thanks, Rosi

ACG

It is not the extra, they would do this for any amount for anyone and most lenders are the same.

They should be taking 100% of your contracted hours, in terms of anything over and above that, it is not guaranteed. It might be at the minute and for the next 5 years, but the people you care for may need to change their hours or find a new carer etc. There might be lenders who will accept 100% of all the hours if you can evidence it for the a while - 1-2 years on P60s.

Mortgage_Adviser

Hello Rositree.
As s broker I know that there are lenders who would take 100% of your income. but there are unlikely to be high street banks.
You need a broker here to find you the right lender.

Rositree

Thanks, Mortgage Adviser, I don't think I've understood the difference between a broker and the mortgage advisor at a bank. I assumed the man in the bank was a broker but only working on the products offered by that bank, and that an independent broker still has to follow the same eligibility, rules and regulations for each individual bank the same as Joe Public going in off the street.
How does a broker get around this?

Pixie5740

A mortgage "adviser" at a bank can only sell you that bank's products. A mortgage broker knows the eligibility criteria for multiple lenders. After a fact find the broker will know which lender(s) is best for your circumstances. You can forgo the broker and do the grunt work yourself but that's a lot of grunt work because there are a lot of lenders out there, some you will have heard of and some you won't.

ACG

A broker (who does not work for the bank) might also be able to get things from a lender you could not get direct.

Some lenders criteria is "fluid" and for the right case might be able to get an exception made. I did a BTL at the back end of last year that fell out criteria on 5 points, but because the bloke was an experienced landlord had a good deposit and a good income, the underwriter accepted it. In that case, it saved around £200 a month on the repayments and around £1600 in fees. Over £5k saved on one case alone. They are not all like that, but a good broker (I dont mean to sound like I am singing my own praises) can make a massive difference for those quirky cases.

An employee of a bank is unlikely to have the ability to do that or the experience to know it can be done. Infact, you will find many brokers can tell you about at least one case where a mortgage was declined with a bank and they managed to get it through with the same bank. Most advisors who work for banks are new to the industry. It tends to be where they get a grounding (or estate agent brokerages) before going to work for a local brokerage or setting up on their own.