mortgage advisor- confused, has he got it wrong??

[pinksky2018xxx]

It's a bit of a long one...

My husband and I are in the middle of selling out house/ buyer another

we have accepted an offer on our house

Before putting the house up for sale, I did a mortgage in principle (I know they can differ but the mortgage advisors figures and £40,000 different)

I input my husband wages and my wages
Husband is 'self employed' although the last time we did a mortgage he was not classed as self employed as his boss pays his taxes and my husband doesn't have his own company etc he works for his boss

i get a salary (plus some over time which the mortgage advisor was not willing to put in)

when I did the mortgage in principle it came out that we could borrow £310000 (i know this can differ but did not think this much)

we have a deposit if £160000 meaning we could potentially get a house for around £470000

we are paying for stamp duty and all other fees cash as we have the money and are not adding it to the mortgage

We are struggling to understand how the mortgage advisor came out with the figure he did. originally we were £27000 short (he told me this via video online) and then after the video call he rang me up about half hour later to say he'd been through bank statement with our ingoing and it was down another £20000!!

at the end of every month after being payed, we have around £2000 disposable income (after all bills and mortgage etc) so we are very confused by his figures

he is saying we can only borrow the same amount we could borrow 4 years (husbands wages have gone up)

4 years ago we had a £70000 deposit where as now we have £160000 deposit

we have no hire purchase agreements, no credits cards etc and we have a very good credit history

I do know last time when we had a mortgage advisor she got the figures completely wrong

any advise appreciated

Could you try a different mortgage advisor? London and Country have quite a wide range of products they can recommend, if you haven't tried them.

@SuperLoudPoppingAction i have already booked an appointment next week with a different one, hoping they can help a bit more! this one didn't even explain anything and was very unhelpful

Mortgage rates have increased significantly. Surely that's the reason?

Have you had any children in those 4 years, affordability checks they do would change this if the case.

@Illbefinejustbloodyfine we didn't even get to that point, and when I did it online payments were going up by about £200/£300 which we can clearly afford

Interest rates have increased and so that has affected lending criteria. Many lenders have become stricter now. The stress test now vs four years ago is also higher, due to higher interest rates and the cost of living.

The mortgage advisor shouldn’t be putting overtime in as that income isn’t guaranteed. If you’ve included it in your figures for the AIP, that’ll be causing some confusion on the numbers. Your husband now being classed as self employed will also affect it, even if his salary is higher. Not sure how your husband is ‘self employed’ if he doesn’t have his own company and his boss pays NI contribution and tax. I doubt HMRC would agree with the assessment he’s self employed.

Change from employed to SE could be the issue, especially if it's not a straightforward arrangement, as your comment about 'his boss' paying his taxes implies.

Can you make up the difference with savings?

@WhereIsMyLight i didn't actually include my over time when I did it, although it does give you an option to do so

i agree, he shouldn't be classes as self employed as his boss pays them Ni and Tax , but yesterday the MA said he is, although when I rang up someone else in the evening and explained it they said they would not class him as self employed because of the things I have mentioned above

he was also only using an average of 46 weeks pay rather than 52 weeks for my husband

@Bjorkdidit he is still employed by the same person he was when we did our last mortgage

Is your husband a contractor under CIS or similar and covered by IR35?

When did he move to that set up?

@Toooldtoworry yes I think that's correct

He's been working with same boss / company for 6 years , when we purchased our current house in 2021 there was no issues

he was also only using an average of 46 weeks pay rather than 52 weeks for my husband

Will that account for holidays, if someone is self employed the time he’s not working he won’t be paid?

I was a contractor like your husband. For me it helped getting rid of the mortgage advisor and going straight to HSBC. They are the only financial institution that doesn’t discriminate against contractors / consultants if you go directly through them.

So it's not recent. Does he also self assess?

It's normal for lenders to use 46/48 weeks of contracted income now to account for annual leave.

@Ozanj there are some very good brokers out there that navigate this market well, but they're not your L&C type.

@Jellycatspyjamas it may account for holiday's etc, although it did not impact us last time, and he has had a number of pay rises since then

@Ozanj thank you for this, this is something I will look into

Can I just say that lending criteria changes all the time, and what a lender will agree to today might not be the same as tomorrow.

Also 4 years ago interest rates were low, and the stress test lenders used much lower than they are today, so it's not overly surprising how much you can borrow has reduced. However, it maybe that the mortgage broker you are using is not experienced in the contractor world and is doing you a disservice.

@Toooldtoworry thank you for your reply

i appreciate all the feedback I have had and all the info

I know mortgage interest rates have a lot to do with it, our rate only changed last year and there is not much difference between that and what there is at the moment

what i'm confused by is when i'm putting in exactly the same income etc (into the calculator online) as he did, I am coming out with a completely different amount ( i thought there might be a slight difference but not that much)

I would also like to know if there is a way around this? we can add a bit more to the deopit, but not the ammount that we were informed of yesterday

I'm sure that there's plenty of mortgage in principle calculators online, and each one will have slightly varying rules based on the banks' risk levels, current interest rates, and hundreds of other data points that help them calculate what you could borrow up to.
Your mortgage advisor would have access to a different one to the one you've used, being as they have access to a wider market and more lenders. I'm sure if you did a MIP with the top 5 banks, each one would vary like that too!

@andymary i appreciate that all mortgage calculator may vary slightly, they have varied slightly by a few thousand when I've looked at different lenders, but they don't vary by the £400000

I've just done some test MIP's on two major banks, with the exact same details and incomes, and one is offering a dramatically higher borrowing offer than the other, with a whooping £58k difference.
So yes, there is major variation.

Additionally, if the MA is classing your partner as being self employed, then his income would be inputted as an average from the last few years. Meaning if he's earnt more in the last 12 months, then that won't necessarily be taken into account, only the lowest average.
So it can also depend on what income you've been putting in, and what income the MA has been putting in - surely your MA will be able to tell/show you what income figures theyve been going off.

@andymary thank you for this info

I can going to get in contact with a few different lenders and see what the outcome is

I think you're better speaking with a whole of market mortgage broker who has experience in this area. CMME in Fareham specialise in contractors (I don't work for them but know very good brokers that do).

If you start doing decisions in principles with multiple lenders you're going to reduce your scoring because you've got multiple searches on your credit file.

@Toooldtoworry thank you for your advice!