P60 mortgage query

R

roadrunner

Registered User
Messages
265
I just received P60 for 2006 and will be presenting it to Bank for mortgage application.
The Gross pay on P60 excludes my pension contributions (which I think is correct). Will the Bank take into account these contributions in determining how much I can borrow ie: they should use Gross plus my pension contribution and then multiply by say 3 or 4 times to get mortgage allowable. Is this correct?
 
Lenders work on your net disposable income as shown on your P60/payslips/salary certificate so, no, they won't take your pension contributions into account unless you opt out of the pension scheme (if you can) and take the money as income instead.

On the upside however lenders advance typically 4.5 / 5 times income - plus room rental if applicable - so you may not need to factor them in anyway.

Sarah

www.rea.ie
 
Thanks for that.
It seems a little unfair to be penalised for having a pension contribution - surely it should be a positive as it demonstrates to the Banks some financial prudence.
On the mortgage calculators where they ask to input Gross Income - should I then be taking off the 10% pension contribution I make?
My company also pays 5% of my gross into the pension so I presume this is not taken into account either?
 
roadrunner said:
On the mortgage calculators where they ask to input Gross Income - should I then be taking off the 10% pension contribution I make?
Click to expand...
The bank needs to look at the income you have available to make payments. If you make 5% contributions to your pension then this 5% is not available to pay a mortgage so shouldn't be factored into the net income available.

With the calculators, you'll be asked for gross income (so input the gross) and for monthly outgoings (loans, CCs etc. which reduce you're available monthly income, I presume you'd input the pension amoount into this section, but depends on the calc you're using).
 
Lenders work on the money you actually have available to pay the mortgage (which does make sense) however your gross income is expressed as your pre-deductions (tax, insurance, pension) salary so do not deduct your pension contributions from that figure - get the figure from the salary certificate from your employer if you're not sure of the amount.

Sarah

www.rea.ie
 
Lenders are simply interested in past credit history and ability to service debt and don't really care if you are prudent enough to be saving for your retirement. Note that if buying a house is your priority then it may make sense to prioritise that over pension savings. If you are in an occupational scheme with employer contributions then perhaps you could contribute the minimum amount to benefit from those contributions. Otherwise there could be an argument for reducing/stopping pension contributions and concentrating on buying the house and getting the mortgage down to a comfortable level before concentrating on the pension again?

Post crossed with previous two.
 
The purpose of the P60 is for proof of earning for Revenue and Social Welfare. Not for your bank. Anyway it is easy to get P60 forms and print anything you like on them. Just get a letter from your employer stating your salary.

Towger
 
You must log in or register to reply here.
Back
Top