How to solve complex income scenario’s for secured loan applicants

How to solve complex income scenario’s

Clients often get turned down for finance due to the income criteria of a particular lender. With our secured loan panel we have a wide range of alternative income calculations and approaches which enable us to help where others can’t.

Below are some examples of the more flexible schemes we have to accommodate our clients.

Loan to income multiples
We have two lenders which impose a maximum loan to income multiple of 6x. The rest simply don’t. If you only need 4x or 5x gross income, it should be easy to find a lender available. If you need much higher multiples it is not unusual for us to offer the equivalent of 7x to 10x gross income.

Income and expenditure calculations
The lenders which don’t rely on loan to income multiples tend to use an income and expenditure assessment.
If your remortgage is failing on income multiples we have a wide range of alternative calculations. Because they just work on affordability, such calculations are of particular benefit to higher earning applicants (especially without children), single applicants and those on interest only or low mortgage interest rates.
These use the actual or reasonable living expenses of the borrowers taking in to consideration the net income and house hold outgoings.
Often using this means of demonstrating affordability can equate to income multiples in the region of 10x.

Self employed income
Different lenders have different rules so it is difficult to generalise. However, in the absence of accounts which show sufficient income, here are some options our lenders can consider to support affordability:

• An accountant’s projection for the coming year
• The last 3 months business or personal bank statements showing regular income and expenditure
• SA302’S
• A letter from the borrower’s accountant confirming the customer/business can afford the repayments
• A declaration of income and affordability from the borrowers supported by an income and expenditure assessment
• A business plan to support affordability and proposed use of business loans where there is no proven affordability at present
• Initial payments rolled up into the advance to assist cash flow and support business growth or short term projects.

Benefits, allowances etc
Various lenders have different views but we can use most benefits and fund loans where the only income is benefits and allowances.

All need to be proven but bear in mind how long they will continue for – for example child allowance. Maintenance can use if backed by a court order.
I recommend you call us if you have any queries.

Other factors affecting affordability
Second charge loans are often used as a short term solution pending a refinance or sale some months or years later. There are therefore other strategies which may be appropriate in the shorter term or features which can be beneficial as follows:

• Interest only loans – including those in retirement
• Borrow up to age 80 at the end of the loan term (in some cases over 80)
• Short term loans with all / some repayments rolled into the advance
• On BTL’s (including first charge) use rental income only – no rental buffer or separate income needed
• Business loans – if no provable income can arrange term loans based on business projections

As ever, I hope this overview is helpful and prompts you to call Promise to see how we can help you place your next remortgage decline.

Important
If your clients have their own limited company, we have a whole range of strategies which may help get cash into the company. Call us to discuss this.

www.promisemoney.co.uk

01902 585052