Are there any mortgage lenders that will ignore nursery and child care fees in their affordability assessment? How can I get a Mortgage with high childcare costs
I receive a constant stream of mortgage enquiries in regards to getting a Mortgage with high childcare costs including substantial nursery fees in place. This is perhaps unsurprising given child care is now in the fabric of society.
If you’re reading this article then the chances are I don’t have to tell you about how astronomical childcare nursery fees can be! As a parent myself I look on the outlay as a second mortgage! The trouble is most mortgage lenders do the same and this reduces the amount you can borrow from them.
The good news is there is a mortgage provider that discounts the cost of childcare and nursery fees in their affordability assessment, which means their calculation can be much more favorable even if you only have one child going through the child care system.
The further good news is the Lender in question normally lends 4.45 times your combined joint income, subject to a full affordability check, which I can run for you. So yes we can get you a Mortgage with high childcare costs but everything about the application needs to be throughout.
It is important to bear in mind that we have access to the whole of the market and following my extensive research I’ve only found one Lender that ignores child care from their affordability calculation. It therefore vital that the application process is handled in a correct way, ideally by a Mortgage Professional (such as Niche Advice), otherwise you could literally be left without any other options.
It is also important to involve a Mortgage Professional to ensure that by discounting this cost you are not being overstretched and the mortgage is genuinely affordable to you otherwise you will end up in bad debt.
Possible impact of ignoring child care costs on the amount you can borrow.
I recently read an informative 2015 survey by Jill Rutter, of the Family and Childcare Trust. In her detailed research she found concluded that the average weekly nursery fees were as follows for under 2s:
| Part time child care (25 hours) | Full time child care (50 hours) | |
| British average | £115 | £212 |
| London average | £152 | £283 |
So to take a typical Lender’s income multiple of 4.45 times income the following table shows the possible impact on child care when looking to get the maximum mortgage based on a household joint income of £40,000. The exact figures will depend on individual circumstances.
One Child In Part Time Nursery Care
| Part time child care | Household income | Weekly rate x 52 | Usable income* | Maximum Mortgage with child care deduction assuming 4.45 time income. | Maximum Mortgage without child care deduction assuming 4.45 time income. |
| British average | £40,000 | £5,980 | £34,020 | £151,389 | £180,000 |
| London average | £40,000 | £7,904 | £32,096 | £142,827 | £180,000 |
One Child In Full Time Nursery Care
| Part time child care | Household income | Weekly rate x 52 | Usable income* | Maximum Mortgage with child care deduction assuming 4.45 time income. | Maximum Mortgage without child care deduction assuming 4.45 time income. |
| British average | £40,000 | £11,024 | £28,976 | £128,943 | £180,000 |
| London average | £40,000 | £14,716 | £25,284 | £112,513 | £180,000 |
* For mortgage purposes. Household income MINUS weekly rate x 52 (annual rate).
As you can see the results are far reaching. In our example, and given the cost of property, it would be difficult for applicants on £40,000 income, with just one child in a nursery, to be able to buy a property with a mortgage at all unless they have a substantial deposit.
As I footnote this Lender does not deduct pension contributions when assessing affordability of mortgages, and has very competitive rates.
As an experience mortgage brokerage Niche Advice specialists in finding the best mortgages for individual needs such as: getting a mortgage with childcare or nursery costs. To find out more, please complete the online enquiry form on this page or call and ask for me personally on T: 020 7903 2044.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines. To get in contact with him please click here.
