Complex Income Mortgages

Navigating Complex Income for Successful Mortgage Applications

In today's economic landscape, having a complex income is increasingly common. This can include being self-employed, working as a contractor, earning bonuses, commissions, or overtime, and having second jobs or multiple income streams. The rising cost of living often necessitates multiple sources of income.

In the upcoming editions, I will delve into each of these income types in more detail. For now, let's explore how lenders view these scenarios and share tips for a successful mortgage application.

Self-Employed Income

One common pitfall for self-employed individuals is striving for excessive tax efficiency. While minimising taxable income has immediate benefits, it can lead to low profit figures, prompting lenders to doubt your affordability. Lenders need to be assured of your ability to repay the loan, so demonstrating higher profit figures is essential, even if it means a higher tax bill.

Contractor Income

Contracting can be lucrative due to higher pay rates for non-guaranteed or sporadic work. To assure lenders of your reliability for mortgage repayments, maintain accurate records of your work regularity, outgoings, and self-assessment if not taxed at source.

Second Jobs and Multiple Incomes

The unprecedented rise in living costs has driven many to seek additional income sources. While this can boost your affordability with lenders, they will scrutinise the feasibility for 2nd jobs. Questions may include how long you've held a second job, whether it realistically fits around your main job, your working hours, and the nature of the secondary employment.

Assessing Affordability

Lenders often consider 100% of your main income and a percentage of any auxiliary income. However, affordability assessments vary widely among lenders, leading to significant differences in maximum loan amounts. It's best to get accurate assessments from at least two or three different lenders.

In the coming weeks, I will provide more detailed articles on each of these topics but in the meantime, feel free to reach out for any clarification.