Pension contributions and mortgage affordability

Duckyduck

For the past few years I have been sacrificing 100% of my bonus into pension, which I believe is a salary sacrifice arrangement.  As a higher rate tax payer with no immediate need for the money this has been a tax efficient use of the money.  

However, I intend to move house within the next 12 months, and being based in the south east prices are high so having the opportunity to borrow as much as possible is appealing.  Will sacrificing a bonus or salary to pension have a negative impact on the amount I could borrow or would the consideration be based on the gross value? 

housebuyer143

It depends how it's recorded on your payslip. My husband did a salary sacrifice arrangement where the pension was deducted from his salary before it made it to the payslip so his gross salary looked 30% lower because he was sacrificing so much. 

Because it was unusual, in the sense that most payslips have your gross pay, followed by my pension deductions and net pay etc, the mortgage company wouldn't include it. He had to cancel his pension so his real gross showed. 

In your case, I believe as long as your P60 shows your actual gross before deductions, then it won't matter if you put it into a pension for affordability purposes.

MWT

To what extent a lender will consider the bonus anyway is a different question of course...

booksandbikes

I am contributing to my pension via salary sacrifice, but my gross (before SS) is on my payslip. This is the value they used for my mortgage application.