What is ‘Salary Sacrifice’ and how will it affect your mortgage application?

Last updated: January 22, 2024

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In the complex world of finance and mortgages, the term “salary sacrifice” often surfaces, raising questions about its implications on securing a home loan. Let’s unravel the mysteries surrounding this concept and understand how it can affect your mortgage application.

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Understanding Salary Sacrifice:

Salary sacrifice is a financial arrangement where an employee agrees to give up a portion of their salary in exchange for non-cash benefits. Common examples include pension contributions, childcare vouchers, or cycle-to-work schemes. While it can offer tax advantages and perks for employees, it’s essential to recognize its potential impact on various financial aspects, including mortgage applications.

Effects on Mortgage Affordability:

One of the key considerations when applying for a mortgage is your affordability – essentially, how much you can borrow based on your income and expenditures. Mortgage lenders typically assess your gross income to determine your borrowing capacity. However, if you engage in salary sacrifice, your gross income may be lower, affecting the amount a lender is willing to offer.

Impact on Mortgage Affordability Calculations:

Mortgage lenders assess your income using different criteria, and salary sacrifice arrangements are treated differently by various financial institutions. Some lenders may consider the reduced gross income after salary sacrifice, potentially affecting the maximum mortgage amount you qualify for. Others may assess your borrowing capacity based on your original gross income before salary sacrifice.

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Providing Clarity to Lenders:

When applying for a mortgage, transparency is key. Clearly communicate any salary sacrifice arrangements to your mortgage advisor and potential lenders. This ensures accurate calculations are used to determine your affordability, preventing any discrepancies that might affect the success of your application.

Considerations for Different Lenders:

Since lenders have varied policies on salary sacrifice, it’s essential to explore your options. Some lenders may be more flexible in their approach, considering your net income after salary sacrifice rather than the gross income. Researching and choosing a lender that aligns with your financial situation and salary structure can enhance your chances of a successful mortgage application.

Planning Ahead:

If you anticipate salary sacrifice playing a role in your financial arrangements, it’s advisable to plan ahead. Evaluate the impact on your gross income and consider how it might affect your ability to secure a mortgage. Engage with a financial advisor to explore strategies for presenting your financial profile in the best possible light to lenders.


While salary sacrifice can provide valuable benefits and tax advantages, it’s crucial to understand its potential impact on mortgage applications. Clear communication with lenders, careful consideration of your financial situation, and strategic planning can help you navigate the complexities associated with salary sacrifice, ensuring a smoother path toward securing the mortgage that aligns with your homeownership goals.

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As always, our advice is to get advice! A reputable mortgage advisor, such as Hudson Rose, can talk you through all your options and help you source the best mortgage deal for your personal circumstances. Contact them on 0330 122 9920 or book in for a chat via their online calendar by clicking here.


And for more helpful mortgage info, try these blogs:

Unauthorised Loft Conversions: What you need to know before getting a mortgage

Understanding Credit Reports

Redeeming your mortgage: Exploring Additional Borrowing

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