Salary sacrifice and affordability

I am looking to do a salary sacrifice to get a new car. 

Salary £45k. Salary sacrifice is £500 monthly however only reduces my take home pay by £295 each month and this also includes insurance, service and maintenance and there will be no fuel expenses as it is an Electric car.  

When my fixed rate on my residential property is up in May 24, I'm wanting to remortgage my home to release equity for another property and I'm conscious of affordability. 

How will a lender look at the salary sacrifice? Will they disregard it as the salary sacrifice can be stopped at any time? OR will they take the full £500 into account when calculating my affordability? OR will they only take into account the amount that my take home pay is reduced by? (in this case £295)

It will save me a significant amount of money on a monthly basis by doing the salary sacrifice but at the same time I do not want to jeopardise my chances of meeting affordability for the remortgage in 2024.

Thanks in advance.

Comments

  • ACG
    ACG Posts: 23,621
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    Most lenders work off gross annual income. 
    Some lenders will discount commitments, but 99.9% of lenders will ignore it and take the view that if your priority was salray sacrifice or keeping a roof over your head, you would choose the latter. 

    Probably not something you need to worry about, but no harm just checking beforehand. 
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Brie
    Brie Posts: 9,294
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    Not answering your question but just wanted to highlight a couple of points.....

    No fuel costs....well yes there are but just different ones that you get from a petrol/diesel car.  (obviously)

    Cost of vehicle....do you know the full cost?  When I looked into something similar all I could find out was how much it would cost during the lease period but not what I might have to pay to actually own the car.  The monthly costs were a bit high for me but I might have managed them if I ended up owning the car but I wouldn't have and wouldn't have known for nearly 3 years (the term I was looking at) how much I might need to pay at the end of it.  

    Not trying to put you off getting a EV but just making sure you're going into it with your eyes open.
    "Never retract, never explain, never apologise; get things done and let them howl.”
  • K_S
    K_S Posts: 6,664
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    edited 25 May 2022 at 12:04PM
    @melj16 I can see some lenders taking this as a monthly commitment as (based on the limited info in your post) I assume it's not something you can simply stop whenever you want.

    I can't comment for every lender (as the approach will differ), but for a recent case where a client had a non-pension salary sacrifice due to run for another 6+ months, the lender took it as commitment on the amount given in the line on the payslip, so the gross amount.

    I am a Mortgage Adviser - You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. 

    PLEASE DO NOT SEND PMs asking for one-to-one-advice, or representation.

  • ACG
    ACG Posts: 23,621
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    ACG said:
    Most lenders work off gross annual income. 
    Some lenders will discount commitments, but 99.9% of lenders will ignore it and take the view that if your priority was salray sacrifice or keeping a roof over your head, you would choose the latter. 

    Probably not something you need to worry about, but no harm just checking beforehand. 
    Sorry, ignore my last post. 

    I thought the salary sacrifice was share save, rather than a car. I was reading whilst on hold. 

    I think the gross amount would be classed as an expense personally but it is not something I have come across before . 
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • K_S said:
    @melj16 I can see some lenders taking this as a monthly commitment as (based on the limited info in your post) I assume it's not something you can simply stop whenever you want.

    I can't comment for every lender (as the approach will differ), but for a recent case where a client had a non-pension salary sacrifice due to run for another 6+ months, the lender took it as commitment on the amount given in the line on the payslip, so the gross amount.
    I've just had this scenario happen to me (just made a thread about it). Nationwide are assessing my £1050 a month gross salary sacrifice payment for my EV lease as if it was a personal loan / hire purchase. That effectively is overinflating my commitment by almost £600 when you look at my salary with the sacrifice, vs salary without and then take off the payment on that. And from that they're saying an extra £45 a month isn't affordable?! Absolute jokers.
  • Grumpy_chap
    Grumpy_chap Posts: 14,417
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    melj16 said:
     Will they disregard it as the salary sacrifice can be stopped at any time? 
    You may wish to confirm the flexibility with the SS scheme.
    For most cases, HMRC rules stipulate that SS that can be varied "at will" is not a qualifying SS and will be taxed as though the income is still all income.  The main exception to that is SS for pension.
    Because of the above, many employers only allow one opportunity per year for SS to be changed.
    In the case of an SS car, many employers require the employee to commit to the full term of the car lease, often 3 or 4 years.
    "stopped at any time" may not be as flexible as you may wish.
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