Many people are embracing a more flexible way of working by becoming sole traders, setting up limited companies and even contracting and freelancing their services, this often means that their income is unpredictable and less common than those who work a regular 9 to 5 job. but even those in 9 to 5 jobs are experiencing an increasingly complex income structure, it’s not uncommon for a payslip to be made up of allowances, commission, bonuses and overtime, which can still lead to irregular and unpredictable pay.
We understand that as long as bills are being paid, on the surface there won’t appear to be a problem. But, when it comes to finding a mortgage deal, the average High Street provider may not see your situation like we do, and can be less willing to offer their most competitive products to those with an unusual financial setup, as they do not fit their ‘one size fits all’ approach to lending.
Lenders make a lot of their decisions based on risk, which is why when someone applies for a mortgage, earning £4,000 one month and £750 the next, they are likely to face objections, however, that doesn’t mean that those with more dynamic income streams can’t secure a mortgage, it might just require a bit of knowledge on which lenders accept different types of income.
At CLS Money, we have access to the whole of the market, which means we can source the best mortgage lenders for those with complex income structures. Some of the lesser-known lenders we can use are much more willing to accept company dividends, rental yields, bonuses, commission and investment interest as viable income, and will not penalise you for drawing on cash from multiple sources. They may also consider you for a mortgage if you are an agency worker, CIS contractor, work in a particularly risky role or are preparing to move to a new home, following a divorce or separation, these lenders are unlikely to be found on your local high street, but because of our constant research into the market, we are completely equipped to deal with any complex income mortgages.
To discuss your complex mortgage requirements and discover how we can help you secure the right product at the right price, regardless of your income structure, speak to one of our brokers today.
How it works
3 simple steps to securing a mortgage with CLS Money
All mortgage lenders have their own criteria. The following factors all play a part in determining their mortgage offer and how much they are willing to lend to you:
Amount you wish to borrow
Size of your deposit
Employment status and income
Length of the mortgage term
Your credit status
If you are applying solely or jointly
In order to be accepted, you need to convince lenders that you are able to repay your mortgage. To do this, lenders typically use your credit report to check your repayment history. Your credit file will contain current and existing records on items such as credit cards, loans, overdrafts, mortgages, mobile phone/s, some utilities payments and all accounts opened in the past six years. If you have had arrears, defaults, CCJs, debt management plans or previously been made bankrupt, there are mortgage options available which we can help you with.
How much can I afford to borrow?
Most mortgage lenders will lend you up to five times your salary. However, this is dependent on a number of factors including your age, number of dependants and current financial commitments. Lenders generally work out how much they will lend you based on what you can realistically afford each month after you have paid your bills, credit cards, loans etc.
Our mortgage advisers can help you understand how much you can realistically borrow before an application or credit search is completed, by assessing your individual needs and circumstances. If you choose to proceed with an application, then our advisers will know which mortgage lenders to approach to ensure you get the required loan amount.
What are the associated costs with buying a house?
When buying a home, you will need to not only have enough money saved for your mortgage deposit, but also your mortgage fees, moving costs and legal expenses. We have compiled a handy list below of all the possible purchase and moving expenses you may have to pay, to help you with your budgeting. The exact fees and amount you will pay, is dependent on the value of the property you are buying and your chosen mortgage lender.
Mortgage booking fee: Some mortgage lenders will charge this to secure a fixed-rate or tracker deal.
Cost: £99 - £250
Mortgage arrangement fee: Some mortgage products will incur a mortgage arrangement fee, in addition to the mortgage booking fee. This fee is either paid upfront or added to your mortgage debt. If you chose to add it to your mortgage, the cost will increase over the lifetime of your mortgage.
Cost: £1,000 - £2,000
Telegraphic transfer fee: Needs to be paid to the lender to transfer the amount you are borrowing for the mortgage to the seller's solicitor.
Cost: £25 - £50
Mortgage broker fee: If you use a mortgage advisor to arrange your mortgage for you, you will need to pay a fee or commission, depending on the value of your mortgage.
Cost: £95 - £495. However, this may vary if you need to use a specialist lender
Valuation and survey fees: Charged by the lender to value the property you are buying. The cost varies according to which survey you choose:
Home condition survey: Most basic and cheapest of all the surveys and often used for new-builds.
Homebuyer's report: More in-depth survey, assessing the inside and outside of the property, and also includes a valuation.
Building survey: A complete survey generally used for older or unconventional properties. Although they are the most expensive, they are certainly worth considering, as it could potentially save you a lot of money if any structural problems are found with the property.
Higher lending charge: Can be charged by lenders if you borrow most of the value of the property.
Cost: Approximately 1.5% of the amount you borrow
Searches: Your solicitor will arrange for the local authority to check whether there are any issues that could affect the property's value. The local council can charge a fee for carrying out these searches and may also request that a drains search be done at the same time.
Cost: £250 - £300
Legal costs: You will need to instruct a solicitor to carry out the necessary legal work for you.
Cost: £850 - £1,500 plus VAT
Stamp Duty Land Tax (SDLT): Charged on all purchases of UK land and property over £125,000. However, the amount you will pay is dependent on the purchase price of the property you are looking to buy, and whether you have owned a home before as follows:
First home: First-time buyers are exempt from paying SDLT on the first £300,000 of the purchase price of a property up to the value of £500,000. All purchases in excess of £500,000 will pay the standard stamp duty rates as follows:
£0 - £300,000: 0%
£300,001 - £500,000: 5%
Next home: If you are currently or have previously been a homeowner, you usually pay SDLT on increasing portions of the property price:
£0 - £125,000: 0%
£125,001 - £250,000: 2%
£250,001 - £925,000: 5%
£925,001 - £1.5 million: 10%
£1.5 million+: 12%
Second property: If you are looking to buy an additional property, you usually have to pay 3% on top of the normal SDLT rates as follows:
Less than £125,000: 3%
£125,001 - £250,000: 5%
£250,001 - £925,000: 8%
£925,001 - £1.5 million: 13%
£1.5 million+: 15%
For example, if you buy a next home for £275,000 the SDLT you owe is calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £25,000 = £1,250
Total SDLT = £3,750
Information correct as of December 2017 - Source: www.gov.uk/stamp-duty-land-tax... costs: Paid to the removal firm (if you choose to use one) to pack, transport and deliver your possessions to your new home.
Cost: £300 - £600
What type of mortgage do I need?
For the majority of mortgages, you borrow money from a lender to buy a property and pay interest on the loan until you have paid it back. The only exception are interest-only loans. Here are the different types of mortgages available:
First time buyers
Buy to let
Repayment mortgages: Every month you make a payment which is calculated so that you pay off some of the capital you have borrowed, as well as the interest. By the end of your mortgage term, you would have repaid the entire loan.
**Interest-only mortgages: **Each month you pay only the interest on your mortgage and repay the capital at the end of your mortgage term. This option will not suit everyone, as you will need to guarantee that you can find the money when the time comes. If you don't, you risk having to sell your property to pay off the mortgage. Lenders can also insist that you provide evidence on how you intend to do this.
Fixed rate mortgages: Popular with first time buyers, as you know exactly how much you'll be paying each month for a particular length of time.
The disadvantages are that you may have to pay a higher rate if the interest rate falls, and a repayment charge if you either switch or pay off your mortgage before the end of the fixed term.
The lender will also automatically place you on a standard variable rate (SVR), which will probably have a higher interest rate, in which case you will need to apply for another fixed rate deal.
**Variable rate mortgages: **Also known as a Standard Variable Rate (SVR) and are every lender's basic mortgage. The interest rate fluctuates, but never above the Bank of England's base rate and is determined by your mortgage lender.
Tracker mortgages: Vary according to a nominated base rate, normally the Bank of England's, which you will pay a set interest rate above or below.
Discount rate mortgages: Some of the cheapest mortgages around but, as they are linked to the SVR, the rate will change according to the SVR and are only available for a fixed period of time.
Capped rate mortgages: A variable rate mortgage, but there is a limit on how much your interest rate can rise. However, as mortgage rates are generally low at present, many lenders are not offering them.
Cashback mortgages: Lenders typically give you a percentage of the loan back in cash. However, you need to look at the interest rate and any additional fees, as it is very likely that you will be able to find a better deal without cashback.
Offset mortgages: Combines your savings and mortgage together, by deducting the amount you have in your savings, meaning you only pay interest on the difference between the two. Using your savings to reduce your mortgage interest means you won't earn any interest on them, but you will also not pay tax, helping higher rate taxpayers.
95% mortgages: Generally for those with only a 5% deposit. However, as there is a risk that you may fall into negative equity if house prices go down, mortgage rates are usually high.
**Flexible mortgages: **Allow you to overpay when you can afford to. Other mortgages give you this option too, but you can also pay less at particular times or miss a few payments altogether if you have chosen to overpay. This does however come at a cost, as the mortgage rate will generally be higher than other mortgage deals.
First time buyers mortgages: All of the aforementioned mortgages are available to first time buyers, although some are more favourable than others. The government also offers a number of incentives for first time buyers through its help to buy scheme.
Buy to let mortgages: Enables you to purchase additional property for renting purposes only. The amount you can borrow is partially calculated on the rent payments you expect to receive.
News and views
Looking to move home or remortgage? Watch the latest vlogs from our mortgage advisors, packed full of handy tips, to help you get on the property ladder and save on your mortgage