Which mortgage should I choose?

ilikepancakes

Please can you guys advise what would you do?

Me and my partner are FTB, had our offer accepted, solicitors nearly finished their work, vendor and chain above is waiting for us and now we are looking for a mortgage. We need £240k to borrow, my girlfriend works on zero hour contract and that's why we ended only with 2 lenders to choose from:

1. Lloyds - no problem with them, affordability £260k. Monthly payment would be £1080, additional £1000 product fee. Important note - they check last 12 payslips from my girlfriend to calculate her income.

2. Santander - they take the lowest payslip from last 3 payslips to calculate income. Affordability is £230k with that. Interest rate is much lower as the monthly payment is £1010 and no product fee.

The problem is, my girlfriend works always the same hours but her payslips are calculated not on a monthly base but for some months they pay her for 5 weeks and another month they pay for 4 weeks, that is why some payslips are higher/lower than others.
Santander mortgage adviser said he can calculate average salary from 12 months and submit the application, our affordability is more than £240k, but it can be rejected by the underwriters.

And now, my question is:
If we apply in Santander and got declined, would it affect our credit file that badly so we will not be able to be accepted in Lloyds if we submit with Lloyds after being rejected in Santander?

Our credit file is very good, I have 476/700 Equifax (988 in Experian), no credit applications within a 1.5 year, all paid in time. My girlfriend has 448/700, but not much history there, only credit card and phone contract. We never missed any payment etc.

Thank you for your help.

[Deleted User]

All that will show is a search. It could have a small impact on how lenders view you, but not significant in the larger scheme of things.

What matters more is your credit history. Ignoring the made up scores, exactly how thin are your files? Any negatives appearing?

haras_nosirrah

Looking at criteria guides there are 34 lenders who accept 0 hour contracts. Looking at santander they do accept 12 months evidence of income and latest payslip plus confirmation from employer of future ongoing employment so the santander broker would appear to have that wrong. Below is santander wording

Zero-hours contracts
Latest monthly payslip (no older than two months from application date) or if paid more frequently than monthly, last four weeks' payslips required (no older than five weeks from application date); and
Evidence of continuous income for the last 12 months; and
Confirmation from employer of ongoing employment arrangement.

Why not consult a broker to see if there are other lenders who may be cheaper/ better for your circumstances. With the 0 hour this would seem to be a situation where a broker could be advisable as they will be able to match you to a lender. How come all the legal work is done and you haven't yet applied for a mortgage? Santander are very slow at the moment - they are taking 3 working days to set up an application once submitted and then a further 2-3 days to be looked at by an underwriter. If there are any queries it is 2-3 days a time for it to be looked at. Other lenders could have you underwritten within 24 hours and the rates will be the similar.

ilikepancakes

No negatives at all, I have checked on Clearscore website and both of us have "8 Things you are doing well:
1. You dont have any court judgements, bankruptcies or IVA
2. No accounts in default or reposession
3. You have been on electoral roll at your current address for a long time (22 months)
4. Very few/none of your accountts have overdue payments
5. Your largest credit card limit is relatively high (I have £3800 limit)
6. You have stayed within your credit card limit in the past year
7. You are using a small amount of your total card limit - below 50%
8. Your current telecome balance is relatively low"

It shows 0 factors to improve.

I have Credit card which i use around £200 a month and pay it off regulary, I have £10k loan which I pay £500 a month and never missed a payment (there is £3200 outstanding but It will be cleared next week). I have car insurance + telecom on me + utility bills and never missed a payment.

My girlriend has only her phone contract and credit card, both only for a year and never late/missed a payment. No previous history as we are in UK since 2016.

Only 1 bad thing happened to me is I went to £1 overdraft for 1 day around 4 months ago but I san't see in in the credit record.

We have to proceed with the application this week and I am really torn as Lloyds is much more expensive and I don't know what to do

ilikepancakes

HARAS_NOSIRRAH - apologies, I meant all the legal work needed to be done for the flat has been done, all the checks, leasehold agreement enquires etc. We have instructed them 3 months ago and now everybody is waiting only for our mortgage.

Santander needs 12 months evidence (this is 12 payslips) but they also want latest payslip so I understand they will use latest to calculate the income? Santander adviser said 3 months of payslips. If it takes 5 working days that's fine, its more about chances of being accepted. And more important, if not accepted in Santander, chances of being accepted in Lloyds after a few days

haras_nosirrah

I really think you should double check with a whole of market broker that there isn't something better for you

a search from santander won't lead to a decline elsewhere but my concern is you have limited yourself to these two lenders when there may be better options for you. If Santander decline and then you go straight to Lloyds there may be a number of better options missed. There may even be better ones than Santander straight off the bat who are quicker and cheaper.

Without doing a fact find a broker on here wouldn't be able to tell you although could give you an indication based on rate alone but I think it is worth double checking as as you can see a rate and fee difference can make quite a large difference to the overall cost of the mortgage and there are certainly more than 2 lenders who do 0 hour contracts.

Hungary971

If I was the seller I’d be jumping up and down and threatentkng to pull out. The first thing you do before anything else is apply for the mortgage then you do everything else. What if now for some bizarre reason you can’t get a mortgage for enough and have to pull out you will have wasted all that money in searches etc.

muhandis

Why do you say that only two lenders consider 0 hour contracts? That doesn't sound right.

Is there any reason why you don't want to consult a whole of market broker?

If it's the fees that you want to avoid, there are plenty of brokers who don't charge any.

As a customer who's found-offered-accepted (and even almost completed legals), most brokers will bend over backwards to get you a mortgage offer!

With all due respect, with varying pay you would be doing yourself a disservice by not using a broker to make sure that the product/lender is most suited to your circumstances.

ilikepancakes wrote: »

my girlfriend works on zero hour contract and that's why we ended only with 2 lenders to choose from:

ilikepancakes

Hungary971: when we made an offer at the beginning of May we informed the seller that we will be able to apply for the mortgage at the end of August. Seller accepted that but asked us and the Estate Agency mortgage advisor to check if we will be able to get the mortgage. We have shown him our payslips, he confirmed we will be able to get the mortgage.

Muhandis, I'm not saying it's only two lenders. It is a lot of lenders but lot of them will lend to us much less then we need (maximum £230k and we need £240k). Lot of them need 24 months of payslips from the same employer.

My girlfirend's "varying" salary is not a problem for us at all because we still can save £1000 a month without streching and if she gets lower salary this month it means she got more then usual last month.