The following is taken from an actual case study* that one of our mortgage brokers has recently dealt with that highlights that mortgages are available for people who need a large income stretch on a low salary.
The client, George, was in a hurry to secure a new mortgage deal as his own house had been sold and he had just had an offer accepted on a new property and speed of mortgage completion was important to him as he didn’t want to lose the property. The mortgage he required was a £53,000 mortgage on a property worth £105,000 – 51% loan to value.
In the initial telephone call he expressed interest in a self cert mortgage and on further discussion with the client it was found that the client felt he would only get a mortgage secured based on a self cert mortgage as he had failed affordability with Woolwich, his own bank, due to a low provable self employed income of £10,500.
George initially wanted a self cert mortgage for two reasons, the first being that his 2011 self assessment form showed a capital allowance deduction of £2,500 for a vehicle purchase that he considered part of his personal income (lenders don’t consider this as income) and secondly his pending tax return for 2011/2012 that he is due to submit within the next 4 weeks would show provable income in the region of £14,500 which would be sufficient for most lenders affordability calculators or income multiples.
After we advised that self cert mortgages were no longer available we found a high street lender that was willing to offer £51,000 as a mortgage based on the assumption of a high credit score and based on their affordability calculator, PLUS after a brief discussion with the underwriter, as soon as the clients new self assessment form is available showing the higher taxable income they would increase the loan accordingly allowing the required £53,000 (and higher if needed) mortgage to be realised.
The benefit of this mortgage structure is that the client could start the mortgage process immediately so this would minimise any delays and could look to secure the new property weeks earlier than if he waited until the end of his tax year – A 3 or 4 week delay in submitting the mortgage application could be the difference in securing or losing the property that he had his offer accepted on.
The £51,000 mortgage available from the lender shows a very high income multiple of 4.85 x which is very unusual in the current mortgage market as most lenders only offer this type of income multiple on salaries in excess of £25,000 per annum. The reason behind this particular high income multiple on this low salary was down to 3 main reasons:
- A low loan to value
- A high credit score
- No other debts or commitments in the background
If you are in a similar position and would like one of our brokers to see what size mortgage is available to you please get in contact with us.
* Case study from 6th March, reference “TMBLSNGeorge”