Income

General policy | Buy-to-Let policy | Income | Property | Special lending situations

 

Index

• Employed customers
• Gross basic income
• Total employed income
• Additional income and acceptable benefits
• Retirement income
• Self-employed income
• Rental income
• Special scenarios
  • customers employed by a private individual
  • maternity
  • child minding
  • split incomes or second jobs
  • temporary contracts and agency work
  • fixed-term contracts

Overview

All applications are assessed on a number of criteria, with affordability always being a key consideration. This allows the individual circumstances of your client to be taken into account and flexible lending decisions to be made based on your client's ability to repay the mortgage. And of course, you can always discuss a specific case with your Business Development Manager.

 

 

Employed customers

The loan must be assessed on current gross basic and/or total employed income, additional income, rental income and/or current/future retirement income.

 

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Gross basic income

 

Defined as gross pay only and excludes any other elements, eg overtime/shift allowance or additional payments such as commission or flexible benefits. Typically, gross basic income is described on a payslip as 'basic salary/pay' and is the same amount every month.

 

If a customer receives gross basic income only, or does not want to use any other element of their income, you will only need to see the latest payslip to verify their income.

 

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Total employed income

Defined as income from permanent employment that is available for use in meeting the monthly mortgage payment.

 

Total employed income includes all elements detailed on a payslip, with the exception of annual/half-yearly bonuses and large 'one-off' payments.

 

Examples of total employed income include:

 

• Basic salary
• Overtime/Shift allowance (doesn’t have to be guaranteed, but must be detailed on payslip)
• Large town allowance, eg London weighting, cost of living supplement etc
• Mortgage subsidy
• State pension - not widow’s
• Private pension
• Company pension
• Car/Housing/Clothing allowance
• Fixed-term contracts
• Bonus - quarterly/monthly/weekly only
• Commission
• Piece work (permanent employment only)
• Flexible benefits
• Stipend

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Additional income

Any additional income entered may need to be verified. If it is likely to be insignificant or difficult to verify do not use.

 

When entering any ‘additional income’, only 60% of the total amount entered is used within the affordability calculation.

 

Acceptable additional income:

 

• Rental income received from other properties (not buy–to-let applications)
• Child Benefit payments
• Disability Living Allowance
• Maintenance
• Bonuses - annual/half yearly
• Investment income/Annuity income
• Income from foster children or lodgers
• Trust income (bank statements are not acceptable; must obtain solicitor’s letter confirming the amount payable each month and, if a capital lump sum can be obtained, to what extent)
• Incapacity Benefits/Industrial Injuries Disablement Benefit
• Permanent health insurance
• Widow’s pension
• Student loans/Grants/Bursaries
• Working Tax Credits/Child Tax Credits
• Expected rental income (main residence cases only)
• Adoption Allowance
• Carer's Allowance

Acceptable benefits:

 

Benefit type	Verification requirements
Adoption Allowance	Letter from the relevant authority or three months’ bank statements.
Carer's Allowance	Letter from the relevant authority or three months’ bank statements
Child Benefit	Three months’ bank statements, coded as CHB and paid into a bank account weekly/every four week; or a letter confirming the amount of benefit.
Child Tax Credit (CTC)	Three months’ bank statements, coded as CTC and paid into a bank account weekly/every four weeks; or a letter confirming the amount of benefit.
Disability Living Allowance - 16 and over - Under 16	Three months’ bank statements, coded as National Insurance number DWP DLA and paid into a bank account weekly/fortnightly /monthly; or a letter confirming the amount of benefit.
Foster income	A letter from the relevant authority or three months’ bank statements.
Incapacity Benefit (replaced sickness benefit and invalidity benefit)	Three months’ bank statements, coded as DWP IB and paid into a bank account fortnightly; or a letter confirming the amount of benefit.
Industrial Injuries Disablement Benefit (accidents)	Three months’ bank statements, coded as IIDB and paid into a bank account every four weeks; or a letter confirming the amount of benefit.
Industrial Injuries Disablement Benefit (diseases and deafness)	Three months’ bank statements, coded as IIDB and paid into a bank account every four weeks; or a letter confirming the amount of benefit.
Tax credits	A letter from HM Revenue & Customs, or  three months’ bank statements.
Working Tax Credit	Three months’ bank statements, coded as WTC and paid into a bank account weekly/or every four weeks.

 

 

Dividends

 

Income from dividends must be confirmed through payslips, dividend statements or SA302s.

 

If dividends form part of a self-employed customer's income, these can be verified through SA302s or an accountant's reference.

 

 

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Retirement income

This will be used to assess affordability when the customer is currently working, within 5 years of their planned retirement date and has requested a term which exceeds that date.

 

Future retirement income

 

• Future retirement income must be used where the customer is within 5 years of their planned retirement or their 65th birthday, whichever is the earliest, and the term exceeds retirement.
• For retired customers or where future retirement income is being used to assess affordability, only the following can be used: rental income from other properties (not buy to let), income from trusts and investments and where the customers own a business & continue to receive income. This income must be available to support the mortgage commitment for the entire term of the mortgage, together with any pension income.

Verification of pension income

 

All elements of current and or future retirement income entered into C&G Caseflow must be supported by evidence.

 

Pension type	Verification of pension income
State pension	- latest three months’ bank statements - SA302s - a letter from the Department for Work & Pensions, dated within the past 12 months.
Company or private pension:	- latest three months’ bank statements - latest pension slip - SA302s.

 

Bank statements are acceptable to verify retirement income, but must be directly mandated to the account from the pension provider.

 

 

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Self-employed income

• Projected income must not be entered.
• SA302s must be obtained in the first instance on all self-employed applications; if this is not available C&G will obtain an accountant's reference.
• Customers who have been self-employed for less than a year will be declined.
• Where the customer has two or more years’ finalised Accounts, these figures should be used.
• Where the customer has been self-employed for more than one year and has one year’s finalised Accounts which can be confirmed, these applications can be referred to Underwriters.
• On C&G Caseflow to appeal a decision you will need to click the orange ‘appeal’ button which will appear after your case has been submitted.
• Include details of the income generated from the date of the finalised Accounts to the present day. This will then be assessed by our underwriters.
• Underwriters must approve any applications where the total lending amount is greater than £250k and one or more of the customers are self-employed.
• The customer must be able to demonstrate that profits of their business are stable or rising.
• Additional income, rental and retirement income may also be used for self-employed customers.
• Sub-contractors may be treated as self-employed depending on how they are paid (see below for details).

Customer works for a single employer

 

A self-employed customer who is sub-contracted to a single employer must be treated as ‘employed’ when:

 

• The customer continues to work for the same employer (becomes PAYE).
• The customer continues to work for the same employer and the company pays the customers’ tax and National Insurance.

Customers who have more than 30% holding in a business

 

Where a customer has a 30% or more interest in a partnership or limited company (public or private), they must be treated as self-employed.

 

Customers employed in a family business

 

Where a customer is employed in a family business but does not own a share in the business or owns LESS than a 30% interest, treat as ‘employed’.

 

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Rental income

Using rental income on a buy-to-let application

 

This is for buy to let applications, and only rental income from the property being applied for can be used.  For joint applications, this must be entered under customer one.

 

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Special Scenarios

Customers employed by a private individual

 

Customers employed by a private individual, eg the customer is a nanny or gardener, will still be able to produce payslips/employer's reference because their employer has to register the employment with HM Revenue & Customs. They may be handwritten or computer generated.

 

Maternity

 

• If a customer is on maternity leave at time of application, use the income received at that point.
• If the customer is due to return to work within the next three months, the future income can be used. An employer's contract, employer's reference or letter from the employer will be required.
• If the customer is receiving statutory maternity pay and is also receiving some income from his or her employer, both parts of this income can be used
• If the customer is due to go on maternity leave in future, but is still currently working, their current income must be used.

Child minding

 

Where a customer is a childminder they can be treated as self employed.

 

Split incomes or second jobs

 

Where a customer has income from two or more types of employment, both can be used provided they are:

 

• Stable
• Long term

Examples would be:

 

• Primarily employed, with secondary self-employed earnings.
• Primarily self-employed earnings, with secondary employed earnings.

Temporary contracts and agency work

 

• Temporary contracts and agency work are non-permanent, and employment may be terminated without notice. 
• They are normally unacceptable sources of income, income from seasonal work, for example, is unacceptable.
• Applications will be considered where the customer has been undertaking agency or temporary work for at least six months and it is likely to continue.
• Where the customer has been working on a temporary basis for under six months, and the work is not seasonal so is likely to continue, the application will be referred to C&G underwriters.

Fixed-term contracts

 

Customers on fixed-term contracts will be considered provided the customer's individual track record suggests that future employment is secure i.e. a customer who's had their contract renewed several times with the same employer.

 

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