With effect from 01 November 2020, we will no longer accept applications from customer’s who are receiving furloughed
income. Only earned income relating to the hours worked by the applicant, and paid by their employer, can be used in the
affordability assessment.
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Basic income
Gross income is defined as basic salary plus any permanent allowances (e.g. car, territorial allowances) and is used to calculate net monthly pay after income tax and national insurance deductions.
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- The latest one months' worth of payslips for all customers.
- Where the date(s) on the payslip(s) shows as DD/MM/YYYY, all dates must be within 35 days of the application
- Where the date on the payslip shows as MM/YYYY, we will accept the payslip(s) which can be either dated in the current or previous calendar month
- Undated payslips are not acceptable
Where a customer is unable to evidence their basic income in accordance with these requirements, the application will not be able to proceed.
See Evidential Documents Matrix for variations subject to frequency of pay.
See Income and Allowance Matrix, for confirmation of acceptable basic income, permanent allowance, shift allowance and variable income.
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Top-up salaries
These can be used where the applicant can prove that the top-up salary is a guaranteed contractual entitlement. Please note, previous years' bonuses cannot be used in the income assessment.
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Latest 1 months' worth of payslips in line with basic income requirements. |
Bonuses, overtime and commission
Where overtime, bonuses and other allowances are shown to be regular, a maximum of 50% of the average amount received can be considered guaranteed income.
- Acceptable: variable income that is received on a weekly, fortnightly, four-weekly or monthly basis
- Not acceptable: variable income that is received quarterly, six-monthly or on an annual basis
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Payslip(s) – see Evidential Documents Matrix for variations subject to frequency of pay.
See Income and Allowance Matrix, for confirmation of acceptable basic income, permanent allowance, shift allowance and variable income. |
Employment allowances
If the customer receives a shift allowance, car allowance or large town allowance that is fixed and guaranteed, 100% can be used as income.
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Payslip(s) – see Evidential Documents Matrix for variations subject to frequency of pay
See Income and Allowance Matrix, for confirmation of acceptable basic income, permanent allowance, shift allowance and variable income. |
Fixed-term contracts
Applicants must have been employed for a minimum of 12 months or more continuous service in the same type of employment, providing there is a minimum of 6 months of the current contract remaining and past history suggests that their current contract is likely to be renewed.
Please note: Applicants are treated as employed contractors unless they pay their own tax
The latest one months' worth of payslips in line with basic income requirements
Any bonus, overtime, commission must be evidenced in line with the Bonus/Overtime/Commission policy
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- Latest P60 AND;
- Current contract of employment with at least 6 months remaining AND;
- The latest one months’ worth of payslips in line with the basic income requirements
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Zero-hour contracts and agency workers
The customer must have been employed for a minimum of 12 months or more with the same employer, as evidenced by latest
P60.
The last years P60 compared to the annualised figure from the average of the last three months' worth of payslips must be used in the affordability assessment. If the annualised figure from the average of the last three months' worth of payslips is lower than the last years' P60, then the annualised figure should be taken.
Any bonus, overtime, commission must be evidenced in line with the Bonus / Overtime / Commission
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- Latest P60
- Last 3 months' payslips, the most recent must be in line with Basic Salary requirements
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Second jobs
Income from a second job can only be used where it is considered likely that a similar level of income will be received for the full term of the mortgage.
We would also take into account the number of hours worked and the sustainability of the applicant having two jobs.
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Evidence in line with basic income criteria |
Parental Leave (Maternity/Paternity)
Where any applicant is on, or is about to commence a known period of parental leave, for the purposes of assessing affordability, the overall lending assessment will be based on the "return to work" income details.
- Where the customer advises they will return to work on the same terms, the normal (pre-parental leave) income can be used. Any future child care costs should be incorporated in the affordability assessment
- Where the customer advises they will return to work on reduced hours, the reduced income and/or future child care costs should be incorporated in the affordability assessment. This should be done on a pro-rata basis based on previous income
- Where the applicant indicates that they do not intend to return to work, or have yet to make up their mind, affordability must be assessed discounting their income
- In all cases, the known period of parental leave and how the customer(s) intend to maintain the mortgage payments and subsidise commitments/lifestyle whilst on parental leave must form part of the affordability assessment, i.e. employee benefits, Statutory Maternity Pay (SMP), partner's income (where party to the mortgage), savings, etc.
- All dependent children including the new addition/s, should be included within the application
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- The latest one months' worth of payslips in line with Basic Salary requirements. For customers already on parental leave, where the full annual income is not evident on the latest months' worth of payslips, the latest one months' worth of payslips received prior to commencement of leave will be required.
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Other Leave (i.e. reduced income for a defined period of time)
Where any applicant is on, or is about to commence a known period of leave, for the purposes of assessing affordability, the overall lending assessment will be based on the "return to work" income details.
- Where the customer advises they will return to work on the same terms, the normal (pre-leave) income can be used where supported by an employer's letter
- Where the customer advises they will return to work on reduced hours, the reduced income should be included. This should be done on a pro-rata basis based on previous income and supported by an employer's letter
- Where the applicant indicates that they do not intend to return to work, or have yet to make up their mind, affordability must be assessed discounting their income
- In all cases, the known period of leave and how the customer(s) intends to maintain the mortgage payments and subsidise commitments/lifestyle whilst on leave must form part of the affordability assessment, i.e. employee benefits, partner's income (where party to the mortgage), savings, etc.
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- The latest one months' worth of payslips in line with basic income requirements
- A letter from the employer confirming when the customer is returning to work, full income details (including pre-leave income) and working hours
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New Employment (commenced within the last 6 months)/Probationary Periods
A copy of the contract of employment is required to establish whether a permanent contract or temporary term contract is
held.
- Permanent Contract – Where the applicant is in permanent employment and the contract states an initial probationary
period, the income should be treated as “Employed Income” in accordance with the Income from employment policy and used
in the affordability assessment
- Temporary Contract (fixed term contract) – Where the applicant is working on a temporary contract at the end of which
the employer has the option to determine if a permanent contract will be offered, then the income will not be considered
in the affordability assessment, unless the Fixed Term Contract policy is met.
Customers who have started new employment or starting new employment with a different employer within 3 months of applying for a mortgage and are unable to provide their first payslip, in accordance with the Employed Income/Evidence required policy will be considered providing the difference in basic salary between the new employment and previous/current employment is equal to or less than 20%
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Where the customer has not received their first payslip, their open-ended Contract of Employment or letter of appointment from the new employer can be used together with the latest payslip from their previous/current employment
Where the difference in basic salary between the new employment and previous/current employment is greater than 20% then we need to comply with the current policy whereby the first payslip from the new employment will be required.
The latest payslip from their previous/current employment should be in line with basic income requirements
We will also consider applications where the customer will receive a decreased salary, in these cases the lower salary should be input.
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Pay Rise/Promotion – not yet reflected on payslip(s)
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Annual Pay Increase (less than or equal to 5 per cent of the customer's evidenced income) OR Promotion Pay Increase (less than or equal to 20 per cent of the customer's evidenced income)
- The latest one months' worth of payslips in line with basic income requirements
- Letter from Employer to confirm new salary
Any increases over and above these amounts must be referred to Underwriting Services for a full assessment
Note: In all circumstances the customer must provide evidence of their previous salary in accordance with the basic income policy and the increase must be payable within 3 months of the application.
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Job offers
A copy of the contract of employment is required to establish whether a permanent contract or temporary term contract is
held.
- Permanent Contract – Where the applicant is in permanent employment and the contract states an initial probationary
period, the income should be treated as ‘Employed Income’ in accordance with the Income from employment policy and used
in the affordability assessment.
- Temporary Contract (Fixed Term Contract) – Where the applicant is working on a temporary contract at the end of which
the employer has the option to determine if a permanent contract will be offered, then the income will not be considered
in the affordability assessment, unless the Fixed Term Contract policy is met.
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The latest one months’ worth of payslips in line with the basic income requirements.
Customers who have started new employment or starting new employment with a different employer within 3 months of applying for a mortgage and are unable to provide their first payslip, in accordance with the Employed Income/Evidence required policy will be considered providing the difference in basic salary between the new employment and previous/current employment is equal to or less than 20%. Where the customer has not received their first payslip, their open-ended Contract of Employment or letter of appointment from the new employer can be used together with the latest payslip from their previous/current employment
Where the difference in basic salary between the new employment and previous/current employment is greater than 20% then we need to comply with the current policy whereby the first payslip from the new employment will be required. The latest payslip from their previous/current employment should be in line with basic income requirements
We will also consider applications where the customer will receive a decreased salary, in these cases the lower salary should be input. |
Foreign currency
Foreign currency income is accepted, providing the applicant is from an approved country and paid in a acceptable currency. We will apply the current exchange rate on day of application.
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- The latest three months’ worth of payslips for all applicants for each income stream – the latest payslip must be dated
within the last 35 days
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