What you need to know about Second jobs for Mortgages and how Mortgage lenders view Second Incomes.
The employment world has changed considerably in the last decade with the emergence of the gig economy, home deliveries and the demise of the high street. The population now seeks work to fit around other commitments to avoid things such as expensive child care costs, and second jobs are commonplace, but how are they factored in mortgage affordability?
This article highlights the frequently asked questions on the topic: second job mortgages and provides answers, solutions and describes the Mortgage Lender underwriting thought process with second income for Mortgages.
As always you should discuss your individual circumstances with a professional Mortgage Broker, such as Niche Advice.
Second Income for a Mortgage Applications – Frequently asked questions
Q) How long does a second Income need to be running before it can be considered for mortgage purposes?
A) Mortgage Lenders operate their own separate rules. As a generalisation the market sits at six months in your current second job, run concurrently with your main job. There are Mortgage Lenders that will consider second jobs after two to three months but these are few and far between.
Q) How will affordability work for second job / Second income mortgages?
A) The standard position is to take 50% of the second job however there are a band of Mortgage Lenders that will factor in the full 100%.
Q) Why do Mortgage Lenders view second job mortgages differently?
A) Their rules will either be based on past experience or a prediction of what may happen. They all have different appetites in terms of risk tolerance. Often mutual building societies are the most risk adverse as they have a duty to their Members.
Q) I have two jobs and have recently changed my main job how does this impact my mortgage plans?
A) If there has not been a break of over three weeks between your Main Jobs there will be options with certain Mortgage Lenders.
Q) My second job is with my family does this matter?
A) Well that’s a big question. A shadow casts over the legitimacy of the arrangement. The Mortgage Lender may question whether the second job has simply been concocted to help you get a mortgage, and fear once in place it will be dissolved or scaled back leaving you with the inability to service their payments.
The size of the firm, your role in relation to pay, length of service, hours worked, salary credits to the bank, and payment of tax will all be looked in arriving at the decision. In my opinion it will be very difficult to convince the Mortgage Lender unless the position is genuine and been in operation for at least 6 to 12 months.
Q) I have a “zero” hour contract as my second job can this be used for mortgage purposes?
A) Yes, there are Mortgage Lenders that will take this into account providing there is 12 to 24 months track record.
Q) Is there a maximum number of hours I can work in a week for mortgage?
A) This is an interesting one. The Mortgage Lenders used to defer to European Human Right guidelines but now generally do not have a cap. The Underwriters will place more on the plausibility of sustaining long hours. Track record therefore is key as is the computing distance between roles.
Q) Does my second job need to be similar the main one?
A) No, but Mortgage Lenders prefer this as they see this as a natural extension of your work. For instance a state employed Teacher doing private tuition makes more sense than say an IT worker that also is also an Accountant. Different roles such as driving instructors or mini cabs are ones that can fit around a main job without issues so again pass the “sniff test”.
Q) My second job is a self employed one.
A) You will need to have been trading for at least a year for this to be factored in to your mortgage affordability and probably two years for a decent interest rate.
Q) I’m in a probationary period can I get a mortgage?
A) The Mortgage Lenders are divided on probationary periods. Typically banks are more relaxed than building societies. The rules would apply to both jobs.
Q) Can I get a second job mortgage if my secondary income is from abroad?
A) It is likely that you will need to be paying UK tax on the foreign income for at least two years. The source and type of income will be important, and your deposit size may need to 20%. I strong advise you seek professional mortgage advice from a Mortgage Broker such as Niche Advice.
Q) Will my interest rate be higher on wth a second income mortgage?
A) No, the individual Mortgage Lender will apply their respective standard rates.
Q) I actually have three jobs does that change second job mortgage rules.
A) Rarely, although I have encountered some Mortgage Lenders that will only take income from two sources.
Q) My secondary income is rental how is this viewed?
A) Some Mortgage Lenders do not take this into account full stop. Then there is a group that will only take the income if the buy-to-let is mortgage free.
Those that take it on mortgages properties will look at the profit showing on your Tax Returns. Two years returns are the standard requirements either working from the latest figure or an average.
Q) My second job was furloughed will this affect my chances of a second job?
A) Well as things stand furlough is over so provided you can demonstrate you are back working then it normally does not have a bearing. There are a few Mortgage Lenders that want you back 3 months but this a minority.
Q) I have received SEISS grants for my second job how does this affect second job mortgages?
A) This shows the Company is susceptible to lock-downs. The Mortgage Lender will look closely at the Sector you work in, and at income in your last 3 months business bank statements, and make a judgment.
Q) I have two “daily rate” contracts will I fall into second job mortgage rules or be treated as self employed?
A) Multiple contracts normally categorises you as “self employed” and Mortgage Lenders will look at your Accounts and/or Tax Calculations.
There are a few Mortgage Lenders that will work off the daily rate x days x 46 or 48 weeks. They typically expect the result of applying this method to produce an annual income higher than £50,000 to £75,000. They will often look for 12 to 24 months contracting experience in the same Sector with six months to remain on both jobs contracts although there are some minor exceptions.
Q) I’ve had a gap between my previous and latest second job does that matter?
A) You will probably have to be in the new second job for 6 months then.