Using Bonus, Commission and Overtime for a Mortgage

Why variable pay is treated differently

Lenders lend against income they believe will still be there in five years. Basic salary is contractual, so it is counted in full. Bonus, commission and overtime are discretionary or fluctuating, so lenders apply a haircut, average it over time, or both.

There is no industry standard. One lender may use 50 per cent of a two-year average bonus, another 100 per cent of the latest year, another may exclude anything discretionary entirely. On a 60,000 salary with a 30,000 bonus, that range covers roughly 337,000 to 405,000 of borrowing.

Typical treatment by pay type

As a rough guide to what lenders do with each element:

• Regular monthly commission: often counted at 100 per cent of a three or six month average where it is a consistent part of the role
• Quarterly or annual bonus: commonly counted at 50 to 100 per cent of a two-year average, with the lower of the two years used if it has fallen
• Guaranteed overtime stated in your contract: usually counted in full
• Non-guaranteed overtime: typically 50 to 100 per cent of an averaged figure, depending on consistency
• Shift allowance and London weighting: usually counted in full where they appear on every payslip
• Car allowance: counted in full by some lenders, ignored by others, and occasionally offset if you also have car finance

Evidence that gets variable pay accepted

The goal is to show the variable element is a feature of the job rather than a one-off.

• Payslips covering enough months to show the pattern, often 12 months for annual bonus and 3 to 6 for commission
• Your two most recent P60s, which capture the full year including bonus
• An employment contract or scheme document describing how the bonus or commission is earned
• A letter from your employer confirming the arrangement is ongoing, where the scheme is informal

How we approach it

We build your income up element by element, then match it to lenders whose rules treat your specific mix most favourably, rather than accepting the first affordability answer. For high variable earners this is normally where the borrowing gap gets closed.