Will banks accept 50% of basic income going on a mortgage?

onlyrenting

Hi all,

Currently looking at a house that was reduced and dropped into the top of my acceptable range. However a mortgage would end up around half of my basic income. Online affordability calculator tend to say it's borderline acceptable, but I hoped I would be able to get some recent, first hand information from people here!

House is on for a fixed price of 285k, however the agent was very suggestive to say that 280k would be accepted, which is what I am aiming to do.

My financials are as follows:

£140k deposit
£34575 per annum basic income (take home of £1987 per month). This maxes out at £45k in 2025.
Around 1800 bonus per year for unsocial hours worked (this is a permanent bonus)
I also do a lot of overtime as well which always takes me into the higher rate tax bracket as per my P60, however I understand banks don't really take this into account. However, for the last 24 months, my take home was never below £2800.

I am also buying with my partner, however my partner only does some casual work from home, generally this is only about £8000 per year, which again I understand the banks will completely disregard.

So if I end up with a mortgage payment of nearly £950 per month out of my basic take home of £1987 per month (disregarding all my extra income), would this be fail criteria for getting a mortgage?

If of any relevance, my credit history is flawless and I can't be made redundant (government employee)

Thank you for your time!

Brie

I think it will be a bit of a stretch for any bank but if you don't ask you don't get.  If there are no other debts at all, minimal credit available (i.e. 1 or 2 credit cards with low limits) then maybe, just maybe.  

The bank won't look at possibilities of redundancy as far as I'm aware.  I was actually facing redundancy the last time I moved with a change to the mortgage and it wasn't an issue.  

MWT

Brie said:

The bank won't look at possibilities of redundancy as far as I'm aware.  I was actually facing redundancy the last time I moved with a change to the mortgage and it wasn't an issue.  

Not relevant for the OP, but just for others who may read this, if you are applying for a mortgage, rather than just switching products, you are obliged to inform the lender if there is any material change in your circumstances during the application and that would include the situation where you have been officially informed that you are in a group being considered for redundancy for example...

Once you inform them, the lender can decide to proceed or not, and ask for more details perhaps before making a decision...  

fergie_

Best advice is likely to find a recommended mortgage advisor who can properly look at your situation and know which lenders to approach.

Having a 50% deposit is certainly very favourable so that would definitely lower the risk in many lender's eyes.

The other factor to consider is the likely hood of more (potentially cheaper) properties coming onto the market and also being able to continue saving? 

michaels

Would it be affordable for you if for whatever reason the OT dried up and your partner's casual work stopped.  It is not just the lenders decision that matters but also what you can cope with. 

I assume you are looking at a longish fix given the affording any rate increase looks unlikely?

johnhenstock

Yes, it will be fine. You’re wrong about banks not taking your bonus and overtime into account, they sure do!

It would also be possible to take your wive’s earnings into account, partially at least, unless she does it illegally and doesn’t declare anything.

There’s nothing unaffordable about that mortgage, but get a good broker!

onlyrenting

johnhenstock said:

Yes, it will be fine. You’re wrong about banks not taking your bonus and overtime into account, they sure do!

It would also be possible to take your wive’s earnings into account, partially at least, unless she does it illegally and doesn’t declare anything.

There’s nothing unaffordable about that mortgage, but get a good broker!

Thanks. I read that due to the current state in the market, banks are wary to calculate any OT or bonuses into affordability, so I assumed it won't make a difference.

My partner's income is all legal, it's self-employment via an LTD company, it's just only very casual work as my partner deals with all the household etc. I have just assumed because it's only about 8k, it wouldn't really be counted in any calculations.

michaels said:

Would it be affordable for you if for whatever reason the OT dried up and your partner's casual work stopped.  It is not just the lenders decision that matters but also what you can cope with. 

I assume you are looking at a longish fix given the affording any rate increase looks unlikely?

I currently pay £700 rent which is going up to no less than £900. Mortgage wouldn't be a problem, as OT is unlikely to stop. Same applies to my partner's work.

I do look for a 10 year fix. In addition, this time next year my basic will be £39k and in two years it's going to be £45k. So I don't see an issue if my mortgage is fixed and my income goes up.

However, even if all extra income stops, my take home with unsocial hours is £2100. I have no other debts, so paying up to £1000 on a mortgage doesn't feel like a problem. If all else fails, property has a spare bedroom with an en-suite, so a lodger is always an option.

fergie_ said:

Best advice is likely to find a recommended mortgage advisor who can properly look at your situation and know which lenders to approach.

Having a 50% deposit is certainly very favourable so that would definitely lower the risk in many lender's eyes.

The other factor to consider is the likely hood of more (potentially cheaper) properties coming onto the market and also being able to continue saving? 

The cheaper properties can always come to the market, one can't predict that. But yes, it is a possibility. However, my new rent anywhere nearby is unlikely to be under £900 anyway, so it would make more sense to pay a mortgage instead.

naf123

Any ideas how many others are interested in the house?  why is the agent only suggesting 5K below asking price? Why not 30K below? its a slow market out there.... it does depend if this is your dream home that you cannot afford to miss out on...

[Deleted User]

naf123 said:

Any ideas how many others are interested in the house?  why is the agent only suggesting 5K below asking price? Why not 30K below? its a slow market out there.... it does depend if this is your dream home that you cannot afford to miss out on...

In certain areas, maybe, not convinced that's general though, in the south west, here, it's not slow.
If a property's priced to sell it will but there will always be vendors persuaded by estate agents to hold out for a higher figure and that's not helpful to vendor or purchaser.

simon_or

onlyrenting said:

Hi all,

Currently looking at a house that was reduced and dropped into the top of my acceptable range. However a mortgage would end up around half of my basic income. Online affordability calculator tend to say it's borderline acceptable, but I hoped I would be able to get some recent, first hand information from people here!

House is on for a fixed price of 285k, however the agent was very suggestive to say that 280k would be accepted, which is what I am aiming to do.

My financials are as follows:

£140k deposit
£34575 per annum basic income (take home of £1987 per month). This maxes out at £45k in 2025.
Around 1800 bonus per year for unsocial hours worked (this is a permanent bonus)
I also do a lot of overtime as well which always takes me into the higher rate tax bracket as per my P60, however I understand banks don't really take this into account. However, for the last 24 months, my take home was never below £2800.

I am also buying with my partner, however my partner only does some casual work from home, generally this is only about £8000 per year, which again I understand the banks will completely disregard.

So if I end up with a mortgage payment of nearly £950 per month out of my basic take home of £1987 per month (disregarding all my extra income), would this be fail criteria for getting a mortgage?

If of any relevance, my credit history is flawless and I can't be made redundant (government employee)

Thank you for your time!

With all respect, you're majorly overthinking this and some of your assumptions are incorrect.

Banks want to lend and they will take into account all forms of income if they are consistent and can be evidenced. Based on your post that would be basic, bonus and overtime.

You working in the public sector neither helps not hinders. For example if you have a permanent salaried job that pays 50k basic, whether it's at the NHS or WH Smith, matters not one jot, it'll be treated exactly the same by the likes of Halifax or Nationwide.

You are more than sorted to borrow what you need, speak to a solid broker and get the ball rolling.

onlyrenting

simon_or said:

With all respect, you're majorly overthinking this and some of your assumptions are incorrect.

Banks want to lend and they will take into account all forms of income if they are consistent and can be evidenced. Based on your post that would be basic, bonus and overtime.

You working in the public sector neither helps not hinders. For example if you have a permanent salaried job that pays 50k basic, whether it's at the NHS or WH Smith, matters not one jot, it'll be treated exactly the same by the likes of Halifax or Nationwide.

You are more than sorted to borrow what you need, speak to a solid broker and get the ball rolling.

Thanks, I do tend to overthink, it is the biggest purchase I will likely do, so not a surprise!

All the news were talking about how banks are cutting down on lending and how it is more difficult, so I assumed the safest bet is to just assume I can only use my basic income and nothing else