How mortgage lenders view commission and bonus income
Many UK workers receive commission or bonuses as a significant portion of their income, but how mortgage lenders view this type of income varies. If bonuses or commission make up some of your annual income, finding a lender who includes the full amount in their calculations can strengthen your mortgage application.
Do mortgage lenders accept commission and bonus income?
Yes, most lenders will include bonuses and commission in their mortgage affordability calculations but the consistency of the payments will be a key consideration. As bonuses and commission are variable income and are not guaranteed in the same way a contracted salary is, there is a risk that this income could decrease or stop. This is why some lenders are more cautious in their approach to variable income.
How much of your variable income is counted?
Across the mortgage market, the amount of your variable income that is counted ranges between around 50% and 100%. However, the lender will also look at factors such as employment stability and, if there is evidence of consistent payments over a longer period such as two years, some lenders will allow a higher percentage to be counted and sometimes, the full amount may count.
What documents will lenders ask for?
To provide evidence of bonuses and commission, lenders will request:
- Payslips (usually the last 3 but some may ask for 12 months depending on the type of variable income).
- The most recent P60.
- A breakdown of bonus structure (they may ask for a letter from the employer).
In addition, mortgage applicants will also be required to provide:
- Proof of ID, such as a passport or driving licence.
- Proof of address (utility bill, bank statement, council tax bill or letter from HMRC dated in the last three months).
- Bank statements for the last 3-6 months.
- Evidence of deposit funds.
