Income
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Buy-to-Let policy | Income | Property |
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Index
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
Total employed income includes:
- Basic salary
- State pension - not widow’s
- Private pension
- Company pension
- Fixed-term contracts (refer to Special Scenarios in
this section)
- Flexible benefits
- Stipend
- Working tax credits
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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)
-
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
-
Bonus – annual/half yearly/quarterly/monthly/weekly
-
Commission
-
Car/Housing/Clothing allowance
- Child Benefit payments
- Disability Living Allowance
- Maintenance
- Income from foster children or lodgers
- Incapacity Benefits/Industrial Injuries Disablement
Benefit
- Permanent health insurance
- Widow’s pension
- Student loans/Grants/Bursaries
- Child Tax Credits
- Expected rental income (main residence cases only)
- Adoption Allowance
- Nursing Bank
- 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.
If the customer receives dividends weekly, monthly or quarterly,
and can be confirmed through payslips, then they can be included
with the figure for their basic salary.
If the customer receives dividends half annually or annually, then
it needs to be entered as other income.
Please note: SA302s must be originals, on headed paper and dated
within the last 18 months. Online prints of tax returns (SA302s)
are not acceptable.
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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), 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:
Examples would be:
- Primarily employed, with secondary self-employed earnings.
- Primarily self-employed earnings, with secondary employed
earnings.
Temporary
employment/short term/fixed term contracts and agency
work
Other than for professionals, eg. teachers, doctors, accountants
etc, income where the customer has been in temporary
employment/agency work or on a fixed term/short term/temporary
contract for less than 18 months, can not be used and must not be
entered into Caseflow.
Where the customer has been in temporary employment for 18
months or more, or where there is a history of fixed/short
term/temporary contracts which total at least 18 months, the income
from this employment can be used.
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