Tronc income taken into account in affordability calculations for home purchase

The clients: A Slovakian couple living in the UK approached us for help in finding a home-buyer mortgage. Both husband and wife work together in a local restaurant. They own their current home outright and intend to turn it into a buy to let rental property once settled in their new home.

The property: They had set their sights on a semi-detached house in Liverpool, a short walk from their current home. Valued at £171k, it has six bedrooms, two reception rooms, three bathrooms and a large kitchen/diner.

The finance: Prior to approaching Mortgages for Business, the couple had gone directly to their bank for a mortgage. Unfortunately, the bank wasn’t willing to take their income from tips (known to HMRC as tronc income) into consideration. For this reason, their application had been declined, and so they asked for our help.

The application process: With access to the whole of market, we knew exactly which lenders we could approach. Working closely with the couple, we decided to take the case to a different high street bank, one which does take tips into account when assessing affordability, as long they are itemised in the payslips. The bank also likes to see six months' of payslips in support of the mortgage application, together with proof of address, residency and identity, and details of any outgoings.

Happy that the couple’s total income didn’t vary too greatly month to month, the bank made a formal mortgage offer within two weeks of submission. Here are the details of the deal:

Property Details

Property value: £171,000

Loan amount: £151,000

LTV: 88%

Rate: 2.49% fixed for 5 years

Term: 21 years capital and interest

Mortgage payment: £775 pcm

Lender arrangement fee: £995 added to the loan amount

Consultant: Erin Gallacher, 01625 416392