“While an additional income stream is to be applauded, not all first-time borrowers will be aware that this additional income may not be factored into their affordability assessment.”
Despite being labeled as the ‘bank for moms and dads’ generation, 64% of first-time buyers have a second source of income to help them save for a deposit, with the figure rising to 85% in London, according to a new survey from the Ipswich construction company.
Research has found that a large number of first-time buyers not only rely on additional sources of income, but also constitute a substantial part of their deposit. The income from this additional work represents on average two-fifths (39%) of a down payment. With a typical first-time buyer deposit of almost £ 59,000, this comes down to £ 23,020 generated by so-called ‘side activities’.
62% of first-time buyers doing additional work say they could not have saved for a down payment without this additional income, while 63% believe it enabled them to buy a property earlier.
Of the potential new owners who disclosed a side business, a third (32%) started a business, half of which was related to their main job and the other half started a business unrelated to their current job.
Other common forms of side work include taking on informal work such as a weekend bar job in addition to their main career (23%), or using skills from employee roles. to earn extra money on the side (22%) i.e. a developer can design websites for friends and family after normal working hours.
21% were willing to do household chores such as babysitting, gardening or cleaning to raise a deposit.
Charlotte Grimshaw, Intermediate Relations Manager at Ipswich Building Society, said: “While an additional income stream is to be applauded, not all first-time borrowers will be aware that this additional income may not be factored into their affordability assessment. For clients with a second source of income, we look for proof of that income, such as payslips or, for self-employment, a tax return. Most importantly, we need the applicant to demonstrate that the additional income is continuous and reliable, in order to be used for future mortgage payments.
“Understanding your client’s sources of income and being able to provide documentation will allow lenders to get to grips with your case more quickly. The trends we have observed in our research are only expected to increase as house prices continue to rise, thus requiring larger deposits, and therefore more first-time buyers are drawn to the road to home. lateral restlessness.
“Of course, first-time buyers, and anyone else with a side business for that matter, should check with HMRC what constitutes additional income and when it should be reported for tax purposes.”