Getting a Mortgage With Bonus, Commission or Overtime Income

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.

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.

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

The best way to secure the mortgage deal you need, using all you income, is to first speak with a mortgage broker who has experience arranging borrowing for people in these situations. They’ll be able to help with:

Proving your income

Whatever your circumstances, a lender will always ask to see proof of income when you apply for a mortgage and a broker will quickly be able to point out for you what documentary evidence you’ll need, saving you a lot of time and stress.

For basic salary and overtime, you can usually supply your last three monthly payslips. However, you will need to show evidence dating further back, to prove that any additional income – such as commission and bonus 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. An alternative is to show award letters from your employer or HMRC annual tax summaries.

Finding 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.

This is where using the services of an experience mortgage broker can really prove to be invaluable.  They will use their familiarity with the market to quickly identify the best option for you, no matter how your income is received.

Getting your application approved – first time!

Once you’ve found the best lender for your circumstances, all that’s left to do is apply. Your mortgage broker will be able to provide all the guidance necessary to make sure you have all the details to ensure you get the mortgage approval you need. All you need to do is follow their instructions.

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.

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.

HSBC

HSBC will typically consider 50% of any variable income received monthly, quarterly, half-yearly, or yearly.

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.

Currently (May 2023) the typical interest rates you could expect to get for a mortgage range between 4%-5.5%, depending on the size of your deposit, type of property you’re looking to buy and personal circumstances.

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 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.