You may have had trouble getting a mortgage in the past because high street lenders considered your income as unstable. Fortunately, we deal with professionals who get paid on commission, bonuses, and overtime. So, if you want the greatest mortgage guidance, submit an inquiry!
It’s unclear whether a mortgage may be obtained based just on commissions
Yes! Remember that every lender is different, and just because you were turned down for a commission-only income mortgage doesn’t mean there aren’t good lenders with amazing rates out there! To get a commission-based mortgage, a mortgage broker can help. Our network has brokers who specialize in consumers with complex income.
Mortgage lenders’ treatment of bonus or commission income
If you work in sales, you will most likely be paid a base salary plus commission or bonuses based on how many sales you close. Other professions are rewarded for productivity, and some businesses pay bonuses or commissions based on certain Key Performance Indicators (KPIs).
How consistent should my commission payments be?
As previously stated, lenders will evaluate your bonus and commission income differently.
- Some businesses will only accept monthly payments.
- Some will only accept payments on a monthly or quarterly basis.
- Others, on the other hand, will accept annual payments.
- Some will not accept weekly commission payments, while others will.
- And some will consider commission income whenever it is paid to you as long as you can demonstrate that it is consistent enough to budget for and afford repayments.
For some people, commissions or bonuses may be the same amount each time, whereas for others, it can be volatile, with some months earning hundreds of dollars and others earning nothing (whilst still taking home a basic salary). However, lenders may be concerned about how people who earn commission and bonuses on top of their basic salary will be able to consistently make mortgage repayments if targets are missed and this additional income is not made, given that it is not guaranteed.
Obtaining a mortgage if your commission exceeds your basic wage
Some lenders will only consider commission income up to 100 percent of your basic salary. This can mean that someone who is highly incentivized and earns the majority of their income through commission is limited in how much they can borrow from some lenders. Fortunately, there are providers who are willing to consider the total earned income, regardless of whether it is from basic or commission, and regardless of the ratio between the two.
How long must I have been earning commission?
Many lenders require commission to be earned for at least 2-3 years before considering it, while others are satisfied if it is evidenced as a regular payment over a 12-month period, and a minority can consider it after only a few months.
Keep in mind that some lenders will calculate commission income as an average over two years, so if income is higher today than it was last year, the amount that the lender will consider may be reduced. Similarly, if income has recently decreased, lenders will most likely limit the amount they consider lending to the current month or recent history.
What percentage of my commission earnings will mortgage lenders accept?
Some lenders will not consider any commission income, while others will only consider 50%, and a few will consider up to 100% in the right circumstances.
Obtaining a mortgage while working on a commission-only basis
This can be more difficult due to fewer approachable lenders, but as we’ve already discussed, there are mortgage providers who accept all evidenced income, regardless of source. If you can provide complete proof of your income, one of these adaptable lenders may have a high enough appetite for risk to offer you a mortgage with a 100 percent commission. In a niche scenario like this, you should speak with a mortgage broker who specializes in customers with complex income. They will know which lenders to approach for a 100% commission-based mortgage and will be able to introduce you to the right one the first time.
Affordability of commission income mortgages by lenders
Another factor to consider is the lender’s generosity in calculating general affordability based on your commission or bonus income and the mortgage. Whereas some lenders will only lend three times your salary, others may be willing to lend four or five times. and a few lenders have even been known to lend six times under the right circumstances. Of course, you should never accept a loan that you are unable to repay. However, depending on how much of a deposit you have, you may not need to borrow as much, which can make getting a mortgage with commission income easier.
Is it possible to get a mortgage that includes your bonus income?
Yes. Because the way lenders and underwriters calculate bonus income for mortgage applications is often similar to how they deal with commission income, the sections for commission income are usually applicable to bonuses as well.
As an example.
- Will the length of time you have been earning your bonus affect your mortgage application? (Yes, this works in the same way that commissions do, with some lenders insisting on 2-3 years, others 12 months, and a minority only a few months.)
- How consistent must bonus payments be in order to qualify for a mortgage? (Lenders evaluate yearly bonus mortgage applications, quarterly and monthly bonuses, and certain monthly and weekly bonuses.)
- Obtaining a mortgage if your bonus income exceeds your basic wage (in the same way as commissions, some lenders will cap lending to basic salary).
- How much of my extra income can I include in my mortgage application? (Some lenders will accept 0%, while others will consider up to 50%, and a few will consider 100%.)
- Lender affordability for guaranteed bonus mortgages (of course, general affordability calculations apply, where some lenders will cap lending to different multiples of a borrower’s income, some maximums are 3x the income, others 4, a few lenders consider 5x income, and a handful can even go up to 6x in the right circumstances).
It is important to note that bonuses are frequently paid differently by employers and are regarded as more reliable by some. There is also less emphasis on the bonus vs. the salary, and people who earn bonus income tend to have higher basic wages and are paid smaller bonuses. Although many lenders see many similarities between bonus and commission income, keep in mind that some will often assess them in different ways, so we would always recommend speaking with a specialist beforehand to get accurate advice on using bonus income for mortgages. Make an inquiry, and the brokers with whom we work will gladly discuss your case over the phone.
How to Document Commission and Bonus Earnings on a Mortgage Application
If you intend to secure a mortgage using bonus income to improve your qualification chances, the lender will require proof that you are earning this additional capital. In general, most providers will want to see.
- Your most recent three pay stubs, with bonus and commission clearly visible.
- Your most recent P60 report
This may differ if you have any bad credit (as previously mentioned), as some providers may require 12 months of wage slips due to the higher risk involved.
Is there a distinction between overtime and commission and bonus income?
From the perspective of a mortgage lender, it’s not much different. Only a few mortgage companies will let you declare any of your overtime at all, while others will accept a capped percentage of it, and still others will accept 100 percent, as long as you can prove your overtime payments to their satisfaction.
A lender may request the following types of proof from you:
- Your most recent three months’ pay stubs with overtime included
- P60/HMRC Annual Tax Year Overview from Previous Years
- Your most recent bank statement
- A letter of confirmation from your employer
Over time, some lenders distinguish between guaranteed and non-guaranteed loans. If you can demonstrate that your overtime is a fixed part of your job, you may have a better chance of finding a lender who will let you declare 100 percent of it. Some lenders may only allow you to declare an average figure or a capped percentage for sporadic non-guaranteed overtime.