The Society will accept the following types of income:
(a) Salary: payslips for the previous three months must be provided and a P60 where possible. A reference will be requested from the employer to confirm the individual and their employment status, including length of service and permanency of position. If borrower(s) are subject to a probationary period, the period must either elapse pre-completion and be confirmed as such by the employer, or authorisation to proceed is required by the Executive.
The maximum permissible age for earned income is 70 years. For applications where the term will exceed the borrower(s) stated retirement age, or the borrower will reach 70 years of age (whichever is the earliest) a secondary assessment of affordability, based upon pension income must also be conducted.
For cases where income is not derived in GBP, please refer to (k) Foreign Currency, below.
From the payslips, the following income can be included at the stated %:
- 100% of basic salary
- 100% of guaranteed contractual shift allowance
- 100% of guaranteed contractual mortgage subsidy
- 100% of guaranteed car allowance (reduced by the value of any car loan)
- 50% of regular overtime/bonus/commission confirmed by P60 and payslips
(b) Self-employed: copies of accounts for at least the previous two years, sufficiently detailed to provide evidence of income and expenditure through the relevant company. In certain circumstances information on future income projections may be requested (for example if the business has only been established for a short period of time or accounts are more than a year old). An average of the adjusted profit over the two years will provide the income, but this must not exceed the adjusted net profit for the latest year taken into consideration. Confirmation of profits will be requested from the borrower(s) accountants and their authenticity will be confirmed through the relevant professional website if not already known.
Sub-contractors, working through the Construction Industry Scheme (CIS) will be treated as self-employed.
In all cases the Finance Director or Finance Manager must review the accounts to confirm the income to be used in the affordability calculation.
The maximum permissible age for self-employed income is 70 years. For applications where the term will exceed the borrower(s) stated retirement age, or the borrower will reach 70 years of age (whichever is the earliest) a secondary assessment of affordability, based upon pension income must also be conducted.
(c) Fixed Term Contractors: workers on a fixed term contract are acceptable, subject to:
Min Period in Current Contract Min Period Remaining Times Renewed
Below 75% LTV 6 months 3 months 0
Above 75% LTV 12 months 6 Months At least once
Any such contract should come directly from the company for which the “employee” is providing services and not via a third party.
The contractor should be considered to be a professional and employed in one of the following fields: medicine, finance, scientific research and development, engineering, education or technology. Evidence of their employment track record may be required. There should be a gap of no more than two months between contracts.
Income will be calculated upon the following basis:
- (Contractual day rate x 5) x 46 (weeks) minus tax and NI at the individuals prevailing rate
(d) Pension: evidence of pension payments anticipated once borrower(s) reach retirement age if the mortgage period extends into retirement.
(e) Personal or child maintenance payments: where these are being received, a confirmation of the income and period which it relates to will be required and they must be via a court order.
(f) Foster income: where a foster carer has been employed in this capacity for more than 2 years, the Society will take into account 100% of their average earnings, assessed over a 2-year period. All foster children must be included as dependents when assessing affordability. A letter from the agency or body that employs the foster carer will be required to ensure the ongoing relationship and to provide a source of income evidence.
(g) Rental income: details of the rental history on the property would be required with evidence to support the continued letting of the property. The income used must be net of any mortgage payments and adjusted for tax and other property repair costs to give a net income. Where the property is privately rented on a longer-term basis, a small adjustment may be made to account for gaps in tenancy. Where a borrower intends to take advantage of the rent-a-room initiative, an assessment of the feasibility must be conducted. The Society will favour applications where an ongoing lodger or shared living situation is in existence. A maximum of 50% of the anticipated rental income, can be considered when assessing affordability subject to the Society being comfortable that sufficient appetite to ‘rent a room’’ exists (for example in major cities, where single accommodation is costly). Where the LTV is in excess of 75% and income derived from the ‘rent a room’ initiative is to be considered when assessing affordability, the case must be referred to AmTrust for consideration.
(h) Child benefit and tax credits, such as working families tax credits and child tax credits are acceptable in full, subject to payments being assured for at least 5 years at the outset of the mortgage. Where these benefits are paid as an element of a Universal Credit payment, the Society will continue to accept 100%. No further aspects of Universal Credit benefit will be included in the affordability assessment.
(i) Social security benefits (such as Job Seekers Allowance): income will only be taken into account in exceptional circumstances at the discretion of the Executive, but in such cases the loan to value should not exceed 75%.
(j) Foreign Currency income: The Society recognises that an increasing number of UK Nationals, are residing in the UK whilst being employed by an overseas employer. Income in this situation is often paid in the national currency of the organisation they work for. The Society will consider applicants with income derived in the following currencies:
- Australian Dollars
- Canadian Dollar
- Denmark Krone
- Hong Kong Dollars
- Norway Krone
- Qatari Ryals
- Saudi Ryal
- Singapore Dollars
- Swedish Krona
- Swiss Francs
- US Dollar
- UAE Dirhams, (Emirati Dirhams)
Minimum income £40,000 (sterling equivalent).
For the purposes of affordability, income will be subject to a 20% (haircut) reduction, prior to any affordability assessment or the application of a stress test.
For cases in excess of 75% LTV, applications must be referred to AmTrust for consideration.
Income may arise from more than one source and therefore all sources of on-going income should be taken into consideration within an affordability calculation and for all borrowers, unless the borrower(s) specifically request that an income is excluded in any affordability calculation.
Consideration of savings and other sources of income to cover gaps in earnings should be factored into the underwriting process. This is particularly relevant where an individual works in an industry which is seasonal or at risk of redundancy. Family planning for borrower(s) in certain circumstances should be considered as levels of income are likely to fall in periods of maternity/paternity leave. It is acceptable to make enquires of this nature as part of the fact find process.