Updated: December 16, 2021

Getting a Mortgage With Bonus, Commission or Overtime Income

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: December 16, 2021

When you apply for a mortgage, a lender will decide how much you can afford based primarily on your income. It’s helpful to know that they’ll usually let you borrow up to four or five times your annual income.

However, the calculation and approval process become a little more complex if you receive variable income, such as commission, bonuses, and overtime. In this article, we’ll explain the difficulties you could face and how to work around them.

Topics we’ll cover include…

Do commission, bonuses, and overtime count towards a mortgage?

Yes, it’s possible to qualify if you’re in receipt of any or all of these types of earnings. However, these income sources are considered less reliable than salary, so they will not always count in full towards your mortgage.

Each lender has its own rules about what portion of your commission, bonus, and overtime income they’ll consider. Many will consider just 50%. Some will consider 60% or 75%. Others will consider 100%, subject to your credit history and track record.

How often you receive this income is also a factor. If it is paid monthly, almost all lenders will count at least some of it towards your mortgage. That’s because it’s fairly easy for them to look at your track record and see if you regularly achieve the income level you’ve declared on your application.

If you receive these payments yearly or half-yearly, some lenders are more cautious. Your track record is more difficult to establish as the payments are less frequent. Some lenders will not count it towards your mortgage, so you’ll have to look harder for ones that do.

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How to get a mortgage based on commission, bonuses, and overtime

We’d recommend you follow these three steps to secure a mortgage deal.

Step one: Be prepared to prove your income

Whatever your circumstances, a lender will always ask to see proof of income when you apply for a mortgage. For your basic salary, you can usually supply your last three monthly payslips.

You can also use your monthly payslips to show your overtime income. However, you will need to show evidence dating further back, to prove that this income is consistent over the long term (usually meaning at least two years). You can do this by providing your last 24 monthly payslips or two P60s.

You can use the same evidence to prove your commission and bonus income. An alternative is to show award letters from your employer or HMRC annual tax summaries.

Step two: Find a lender who takes all income into account

A common mistake people make when applying for a mortgage is to save time by simply applying to whichever bank they have an existing account with. This is rarely the best strategy, and that’s particularly true if you have a variable income.

It’s crucial to find a lender who will consider 100% of your bonus, commission, or overtime income. Otherwise, you might be approved for far less than you can really afford, meaning that suitable homes will be out of your budget.

But it’s not just a matter of finding a lender who’ll consider 100% of your income. It’s also about comparing the rates offered by all those lenders and choosing the best deal for you. While this is a big job, it can save you thousands of pounds (or more) over the lifetime of the mortgage.

The smart move is to work with a broker who specialises in finding mortgages based on commission, bonuses, and overtime. They will use their familiarity with the market to quickly identify the best option for you, no matter how your income is received.

If you get in touch we will arrange for an advisor we work with, who has the right experience dealing with applications of this nature, to contact you straight away.

Step three: Make your application

Once you’ve found the best lender for your circumstances, all that’s left to do is apply. If you’re working with a broker, they will take care of this part for you, so you’ll just need to follow their instructions and provide the paperwork they request.

If you’re working alone, it’s not unusual to be turned down on your first application. This will typically be because the lender will only consider a portion of your variable income rather than the full amount. Don’t let this worry you, as there are plenty of other lenders you can approach, but you might decide it’s better to work with a broker on your next attempt.

Lenders and rates

In terms of which lenders will consider variable income and how much they will consider, it is rarely a black and white issue. Below, we’ve summarised the policies of three top mainstream lenders, though these rules can vary for individual applications.

Barclays

Barclays will consider 100% of annual bonus or commission income towards how much you can borrow, but only 50% for affordability purposes. They will typically use the most recent year’s figure, or an average of the last two years if this is lower.

For monthly commission and overtime, Barclays will consider 50% of the total received, or up to 100% if you can provide evidence of long-term sustainability. At the time of writing, rates on offer are between 1.89% and 3.10%.

HSBC

HSBC will typically consider 50% of any variable income received monthly, quarterly, half-yearly, or yearly. At the time of writing, rates on offer are between 1.69% and 3.60%.

Natwest

Natwest will consider up to 100% of monthly or quarterly bonuses, commission, or overtime. If monthly, they will take an average of the last three months and consider 100% of the annualised amount.

For annual bonuses or commission, they will consider 50% of the average of the last two years. At the time of writing, rates on offer are between 1.94% and 2.87%.

It is possible to apply to any of these lenders directly for a mortgage. However, the complex rules about variable income make it difficult to predict the rate you would qualify for. It is more sensible to shop around and work with an expert to identify the mortgage that is best for you.

Finding a mortgage broker experienced in different income sources

Part of a broker’s job is to make the mortgage application process as quick and painless as possible. So, you don’t want to spend a lot of time explaining to them the complexities of your income structure and how much you really earn.

It’s best to work with someone with experience in commission, bonus, and overtime mortgages, who can quickly get to grips with your income in real terms, whether it’s paid weekly, monthly, quarterly, half-yearly, yearly, or irregularly.

It’s also important that the broker you choose has ‘whole of market’ access so that they can compare every deal available. If you’re limited to a specific lender or lenders, that could reduce the amount you can borrow.

To find a specialist that meets all these requirements, you can use our broker-matching service. It just takes a few moments to submit your details, so that we can connect you with an experienced professional for a free, no-obligation chat. To get started, just call 0808 189 0463 or contact us online. 

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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