Undeclared income treatement in mortgage application

[anntionette]

Hi, can anyone help me im going blind reading posts trying to figure this out. PLease help me?

Im moving back to Dublin with my partner next month to start his new job. Been in uk for 7 ish years. Cant wait!

And Im trying to figure out how the bank would treat my untaxed or undeclared income for mortgage purposes. I will start working (teaching privately)So self employed earning approx 2k p/m from next month.
My partner 120k p/a guaranteed bonus 20k.
we have an apartment to rent 1400 p/m.
No loans or other significant repayment expenditures.

we would like to buy a house in 1 years time when my partner is in his job a year. I will wait a year to submit tax returns for previous year. what im really concerned about is how the bank would treat my income? id have a business account set up where all my earnings and related outgoings would be lodged. Would they even consider it as income? would it be included with my other halves income as 3.5times calculation? and what documentation would they need to use my income in the calculation?

We would like to try for as big as mortgage as we can. It would be nice to have a house by the seaside to fill with lots of kids but am i only dreaming? will the bank take my income seriously without a P60? All Id have at the time of application would be a business account with funds going in and out.

Thanks anyone who can light on this for me. Soooo much has chanced since ive been away!

 

[T McGibney]

And Im trying to figure out how the bank would treat my untaxed or undeclared income for mortgage purposes.

With contempt.

You can avoid this by declaring this income and paying the taxes. Then you're sorted and you can use this income in your application.

 

[Dave_Curry_IMC]

The banks won't take any income into account for you until you have two full years of historical tax returns, i.e. January 2021 at the earliest, in your case. This is how self-employed applicants are assessed, as the income is by its nature variable and higher risk (whereas a guaranteed salary from a permanent job is relatively safe). The only way for any of your income to be used towards the application sooner than that is to take a PAYE job instead. If 3.5 times your partner's income does not get you as mush as you want, it may be possible to get an exception to that rule (the banks have an annual quota of exceptions, with the upper limit usually ranging from 4 to 5 times incomes).

Another important factor to consider is that the banks will not include any of your partner's bonus in their assessment until is has actually been received, regardless of whether written confirmation of it being guaranteed is provided.

Best regards,
Dave Curry (broker)
https://www.linkedin.com/in/davecurryirl

 

[Gordon Gekko]

With contempt.

You can avoid this by declaring this income and paying the taxes. Then you're sorted and you can use this income in your application.

To be fair, I think that the OP just worded the title badly and means that she won’t have paid or declared the tax until the following year.

As opposed to “how can I get value for my under the table income?”.

 

[anntionette]

Thanks for the advise but thats in 2 years time... Maybe i wasnt clear from my long winded question, i am not required to declare it until ive earned it and can to a tax return which is not due for another year. In the meantime how does the bank see it. Sorry if i wasnt clear.

 

[anntionette]

Thanks Dave, i thought as much. Very frustrating as you could as easily lose your job tomorrow. i guess you'd have to be in the paye job for a year too? Interesting about the exceptions to the rule. Whats the list of banks exceptions for 4-5 times calcs? doubt itll be helpful to me but im really interested now. Do you know or is it a bank secret?

 

[Dave_Curry_IMC]

You wouldn't need to be in the PAYE job for a year - being permanent and past probation (usually 6 months) should be enough. I don't fully follow your question about exceptions but hopefully this answers it: Every bank has a quota of exceptions to the 3.5 times income limit - up to 20% of total mortgage lending for first time buyers, and 10% of total lending for non-first time buyers. How far above 3.5 times incomes any individual bank will go varies quite a bit, due to the different treatment of numerous parts of the assessment (e.g. ages/maximum term, other loans, childcare, pension contributions, bonuses, etc.). Some banks have absolute upper limits of, say, 4 times incomes or 4.5 times incomes, but this is the type of policy that could change at any time, so it wouldn't be too useful to list them here.

The most important thing to keep in mind is timing: the quota of exceptions runs from January to December each year, but the banks generally run out after a few months and stop offering them (none are available right now, for example). This means that if you really need an exception, you should try to apply as early in the year as possible (or very late in the year, as some banks start issuing exception approvals in November or December, on the understanding that the mortgage won't actually be drawn down until the following year.

 

[anntionette]

You wouldn't need to be in the PAYE job for a year - being permanent and past probation (usually 6 months) should be enough. I don't fully follow your question about exceptions but hopefully this answers it: Every bank has a quota of exceptions to the 3.5 times income limit - up to 20% of total mortgage lending for first time buyers, and 10% of total lending for non-first time buyers. How far above 3.5 times incomes any individual bank will go varies quite a bit, due to the different treatment of numerous parts of the assessment (e.g. ages/maximum term, other loans, childcare, pension contributions, bonuses, etc.). Some banks have absolute upper limits of, say, 4 times incomes or 4.5 times incomes, but this is the type of policy that could change at any time, so it wouldn't be too useful to list them here.

The most important thing to keep in mind is timing: the quota of exceptions runs from January to December each year, but the banks generally run out after a few months and stop offering them (none are available right now, for example). This means that if you really need an exception, you should try to apply as early in the year as possible (or very late in the year, as some banks start issuing exception approvals in November or December, on the understanding that the mortgage won't actually be drawn down until the following year.[/QUOTE

Amazng information Dave, Thank you so much!