Mortgage broker - ask me anything

K_S

Hstar123 said:

Hi

Just after some help if possible. So, my broker has applied to Halifax for 80% LTV. On my application, I am employed earning £75k per annum, which is accurate. The company I am working for I was, until 31/03/2023 a 20% shareholder and director. That ceased and then I went full time PAYE. 

The DIP went through and so proceeded to full app. 

Halifax have come back wanted bank statements and payslips for March 23, August 23 and December 2023. 

My March payslip was nominal. August, payslip was correct but payment into account was c. £2,500 higher as between April and November, I was receiving additional income (not included in the basic paye of £75k) as this was technically money owed to me from previous years. December payslip and bank statement correct to the penny. 

my p60 for 21/22 and 22/23 are also lower than the current salary I am on. As are the sa302s. 

My broker is going to explain all the above to Halifax but would appreciate some views on how this could go. 

Many thanks 

@hstar123 As this is an anonymous forum, I’ll be frank

I’m sure yours is genuine employment, but from my experience, 9/10 cases that are similar to yours are people trying to temporarily disguise their self-employment to qualify for a mortgage or get a bigger mortgage.

So that’s what the underwriter is trying to get to the bottom of - whether it’s plausible that you are genuinely PAYE employed, whether it is plausible+sustainable for the ltd co to pay you a 75k salary and whether it is consistent with what you previously earned from the company as a director-shareholder.

 Without going into too much detail, I’m sure you can think of how someone would dig into this, it’s fairly straightforward using a mix of public sources (filings on CH) and documents/queries (related to yourself, the company) that they can ask of you.

Hopefully you disclosed this to the broker upfront or your broker picked this up during the fact find, did the required due diligence, ran it past the Halifax BDM and only then submitted the full app.

All the best, hope it gets to offer soon!

Hstar123

Hi, thanks for your comment. The thing is, it is genuine but how would I be able to prove that enough for Halifax? 

K_S

Hstar123 said:

Hi, thanks for your comment. The thing is, it is genuine but how would I be able to prove that enough for Halifax? 

@hstar123 As far as you are concerned, there's nothing much to do beyond answering whatever queries they raise and providing any evidence they ask for. Hopefully they will find it sufficient to sign off on the application income.

Good luck!

Hstar123

Thank you so much for your answer, I’m just panicking so much! My paye is obviously now higher to in effect rears me for lost income I would have been able to take if I had stayed as a director. I just didn’t want the hassle and stress and wanted to be just on a basic salary and do my main role. 

I have provided all docs but they do show a significant pay rise technically - I suppose my question is are underwriters realistic enough to understand that I went from 50% shareholder to 20% to nil over the last couple of years. And each time paye increased, albeit this one is a higher increase from this last 12 months. 

I’m panicking so much

K_S

Hstar123 said:

Thank you so much for your answer, I’m just panicking so much! My paye is obviously now higher to in effect rears me for lost income I would have been able to take if I had stayed as a director. I just didn’t want the hassle and stress and wanted to be just on a basic salary and do my main role. 

I have provided all docs but they do show a significant pay rise technically - I suppose my question is are underwriters realistic enough to understand that I went from 50% shareholder to 20% to nil over the last couple of years. And each time paye increased, albeit this one is a higher increase from this last 12 months. 

I’m panicking so much

@hstar123 In cases like these, they'll look at it on a balance of probability - what's the likelihood of it being a genuine case vs disguised self employment.

One extreme - the company is a tech startup that you co-founded and you divested your holdings to cash out over the past few years and are now purely an employed executive at the co. 75k is only a small fraction in the company's books.

Other extreme - it's a small co. with a few shareholders, it's a close company and/or you're related to the shareholders in some way, etc. 75k is a large chunk of the co's net profits.

The above are crude examples but as I'm sure you can see, on the balance of probability, scenario 1 is more likely to be genuine employment while scenario 2 is more likely to be disguised self employment. With regard to scenario 2, I think people often underestimate how much public information is out there to make those links.

Tbh, all this should have been picked up during the broker's due diligence, queried like an underwriter would and then placed it appropriately after discussing any 50-50 points with the lender beforehand. I wouldn't expect the client to always know that the background was relevant to the mortgage app.

I know it's easier said than done but try not to stress, just provide responses to whatever queries are raised, any docs that are asked for and hopefully that will be enough to satisfy any red flags in the app.

DJSINGH

Hi
Im looking at offset mortgages. Do lenders such as YBS/CBS require you to have cleared all your credit card debt before completing with them? E.g. Say I had 30k on a Balance Transfer 0% deal outstanding. Would that have to be cleared. 
Thanks

K_S

DJSINGH said:

Hi
Im looking at offset mortgages. Do lenders such as YBS/CBS require you to have cleared all your credit card debt before completing with them? E.g. Say I had 30k on a Balance Transfer 0% deal outstanding. Would that have to be cleared. 
Thanks

@DJSINGH The credit card rate is immaterial to the lender, 0% or 30%, it's treated the same way.

The impact (if any) depends on the specifics and also what the affordability numbers are.

For example, if you're earning 150k and looking to borrow 300k at 60% LTV, 30k of background debt is unlikely to make any difference. OTOH, if you earn 50k and are looking to borrow 220k at 95% LTV, it could be a deal breaker. Just two extreme examples to illustrate the point.

Affordability wise, just play around with the Coventry affordability calc here and you'll get a sense of what kind of impact it may have
https://www.coventrybuildingsociety.co.uk/calculators/AffordabilityCalculator.aspx?ch=broker

Hstar123

Thanks again for your guidance - it’s more like the second one but there is no link that I have to the shareholder. My paye increased from about £30k to £70k post me giving up all shares. 

I did tell the broker and he didn’t seem to think it’s an issue as I’m now employed. 

kingstreet

Hstar123 said:

Thanks again for your guidance - it’s more like the second one but there is no link that I have to the shareholder. My paye increased from about £30k to £70k post me giving up all shares. 

I did tell the broker and he didn’t seem to think it’s an issue as I’m now employed. 

I'm with K_S on this. I suspect you will be asked, as a minimum, to obtain written confirmation from the company's Accountant that your income is sustainable.

Hstar123

thanks that’s great - thank you. That wouldn’t be a problem from the accountant as the pay is definitely sustainable. 

I don’t have much experience of underwriting - are Halifax quite realistic?