why do banks refuse you a morgage if you got a nontaxable pay?

Question

advice if you pls........whats the implication of nontaxable pay?

Answer 1

By "non-taxable pay" do you mean that taxes are not taken out...i.e., you are paid under the table?
In the lending industry, everything has to have a paper trail. They want to see W2s from the last two years to verify income. This is mainly for the underwriters who gather all of your information to make a 'case' when they seek to approve you. If you have undocumented income, that could imply a few things:
1 - Unsteady income
2 - Unreputable employer
3 - Illegal activity (you are a drug dealer)
They wouldn't want to take a risk of approving a mortgage to someone who cannot show them where the money is coming from.
I remember a case where a young lady was a bartender who made $2.15/hour but kicked major butt on tips every month. Based on her hourly wage, of course she couldn't buy a home. The lender from whom she sought pre-approval suggested that she set aside about $2,000/mo from her tips to deposit into her checking account. She was advised to do this for one year in order to prove that her income was steady amount. Of course, she DID have W2s from her base wage, proving that her job was legit.....
My advice would be to explain your situation and ask the bank what kind of 'paper trail' you could establish for them to accept your non-taxable pay.
Good luck!

Answer 2

I'm guessing a bit on what you mean here. Do you mean that ALL your pay is classed as non-taxable?

If you mean that your pay isn't taxed, that either you aren't earning enough to hit the income level where tax is due (~ £5800 per year), or you are receiving your pay gross, and should be completing a self-assessment tax form each year to work out what you should be paying the inland revenue.

If it's the first, then a bank probably doesn't think you earn enough to pay off a mortgage. If it's the second then are you receiving payslips that prove what you are earning? If you don't have payslips or proof then how will a bank know you can afford to pay off the mortgage?

If you mean that you are a trader or self-employed, then presumably you have books or accounts proving so for a few years. If that is the case, then you need to go to a mortgage broker to arrange a "self-certified mortgage". There are a few companies that offer these, but you may find that you are paying a higher rate of interest to the banks for these, than if you were employed with pay-slips.tax etc. The banks involved would be effectively taking you at your word that you could pay, so they'd protect themselves with a bigger mortgage rate.

Do you have a good credit rating? Have you checked using e.g. Experian? You may be refused a mortgage because of this as well.

Answer 3

The non-taxable pay could also refer to pension contributions taken before tax or reimbursed expenses - these might show up as such on a payslip.

Answer 4

Probably the notion that the income is not steady and provable or maybe the safeguard that is imposed by all Financial Institutions concerning Money Laundering.