Using Bonuses and Commission on Your Mortgage Application

illustration of Using Bonuses and Commission on Your Mortgage Application

When your income is based on bonus or commission, sometimes it might change month to month. But this shouldn’t mean you struggle to get a mortgage. Often, you earn MORE money than if you had a base salary, which should mean you’re more attractive to mortgage lenders. But a lot of mortgage lenders just aren’t set up to deal with complex incomes.

Can I get a mortgage on a commission-based income?

Yes, you can absolutely get a mortgage if your earnings are based on commission or bonuses! But because your income isn’t as straightforward as someone with just a base salary, you’ll have to make sure your application is presented properly to lenders. 

It used to be the case that lenders wouldn’t consider an income that changes. But there are specialist lenders that’ll consider your application on a case by case basis. They’ll look at every part of your income when working out how much you can afford to repay on your mortgage. 

It’s a good idea to work with a specialist mortgage broker. They’ll know which lenders provide mortgages for commission-based incomes, and how to find the best mortgage for you. Make an enquiry to speak to a specialist.

What bonus/commission income is acceptable to a lender?

As is often the case, what a lender is willing to count towards your income will depend on who you apply to. Some lenders will accept all of the income you evidence, while some will only accept monthly commission or your guaranteed bonuses. 

That’s why it’s great to work with what’s called a ‘whole of market’ broker, which means they’re not tied to a particular lender. They’re free to find the best mortgage for you with the right lender. 

It’s definitely possible to get a mortgage without fixed earnings, but you’ll have fewer options to choose from than if your income was the same each month. Some lenders might ask you to put down a bigger deposit

If you’re applying for a joint mortgage and one of you is commission-only, you could still get accepted if the other applicant’s income is enough to cover the repayments and other outgoings.

If you receive benefits, some lenders will consider your income from this. If you’re a contractor, some lenders might also be willing to consider your savings if you have enough money in the bank. It’s best to work with a specialist mortgage advisor who can explain your options and find the lender most likely to accept you.

How does income affect how much I can borrow?

When working out the maximum amount you can borrow, mortgage lenders will use what's called an income multiple. Your income multiple is just that - a multiple of your income. For example, if you earn £30,000 a year, your 3x income multiple would be £90,000 and your 4x income multiple would be £120,000. 

Many lenders have lending criteria that determines how much they’re willing to give out. For example, if a mortgage lender had a rule that they only lend people up to 4x their annual salary, then they wouldn’t be willing to lend you more money than that on your mortgage. 

Currently, there aren’t any mortgage lenders who are giving mortgages to people to the value of more than 4.5x their annual salaries. 

This means you won’t be able to get a mortgage higher than whatever your annual income is multiplied by 4.5. For example, if your annual income is £25,000 with an average yearly bonus of £5,000, then the maximum you’d be able to borrow on a mortgage is £135,000. 

Lenders need to know you can afford the mortgage repayments without struggling. They’ll run affordability checks where they test what might happen if you didn’t get a bonus for a few months or if you had a situation where you had to take some leave. 

In the run-up to an application, it’s good to get your finances and credit file looking as good as possible. Read more in our guide: What Do Lenders Look For in Mortgage Applicants?

How do I prove my bonus/commission-based income?

It’s much easier to prove your income if you’ve been in your job for a while. This is because you’ll have payslips as evidence that will hopefully show a pattern of income using your bonuses and commission.

Some lenders might request that you can’t apply until you’ve been in your job for a year. Other lenders might be happy to consider you if you’ve just started a new job. However, be prepared to be offered a mortgage calculated from your base salary only.

It’s a good idea to work with a mortgage broker if your income isn’t straightforward. The brokers we work with have seen it all - they don’t back down from a challenge. Make an enquiry to get matched to the right broker for you.

What if I’m part time?

A lot of part time jobs have a bonus system as a way to boost your salary. If you’re a server or bartender you can count tips towards your income, but you’ll need to show this extra income properly in your application (that’s where using a mortgage broker really helps). 

If you have a lower salary because of working part time, any additional income you receive will really help your application. Make sure you’re properly documenting and declaring your income, and a lender should take it into consideration. Need help getting a mortgage? Make an enquiry to get started. 

How can I improve my chances of getting a mortgage using commission and bonuses?

Getting a mortgage when your income fluctuates can be a challenge, but it’s not impossible. There are other steps you can take to give yourself the best possible chance of being accepted.

Check your credit score

Along with your income, lenders will be looking at your credit score. Lenders use this score to see how risky you are to lend to. If your income is complex but you have a good credit rating then this will work in your favour. 

Check your credit score regularly (we recommend checkmyfile) and do all you can to keep the number high and your record looking good. 

Get simple credit tips in our Guide: How to Improve Your Credit Score Before You Apply For a Mortgage. 

Get to grips with your income

Compared to someone with a fixed salary, the amount you’ll be able to borrow can be tricky to calculate. Lenders try to tackle this by looking at your annual income from the last three years and will take an average or lowest figure to work out how much you’ll be able to pay back. Start going through your payslips to get an idea of numbers. 

You can then use a Mortgage Calculator to see how much you could potentially borrow. 

Put down a bigger deposit

If you’re a first time buyer, putting down more money upfront will do more to offset the risk for potential mortgage lenders. It also shows you’re a good saver, and will open you up to more competitive deals. 

Work with a mortgage broker

The mortgage market is big. It can be especially overwhelming if you’re worried about a complex income. Most of the specialist mortgages aren’t available to you directly as an applicant, they’re only available through mortgage brokers. 

A broker knows the whole of the market, will know which lenders are most likely to accept you, and will be able to make your application look as good as possible. Get matched to a broker. 

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