Most people on PAYE assume their mortgage is a formality. It usually is — until part of the income isn't basic salary. Lenders treat bonus, commission, overtime and allowances very differently from one another, and a household earning the same total can be offered materially different amounts depending on which lender reads the payslips. If your pay is anything other than a flat salary, it's worth knowing where you stand before you offer on a property.
How lenders treat variable pay
- Bonus — commonly averaged over two years, and often only 50% of it counted; some lenders take 100% if it's regular and evidenced
- Commission — usually averaged, with the same 50%-to-100% spread between lenders
- Overtime — treated as regular or non-guaranteed, which changes whether it counts at all
- Shift and car allowances — often counted in full, but not by every lender
- Second jobs — some lenders accept them after 12 months, others ignore them entirely
New job, probation, or about to move
Starting a role doesn't block a mortgage. Several lenders will lend from your first day on a signed contract, and some will accept an offer letter before you've started. Probation periods are more variable — a minority of lenders decline outright, most don't mind. If you're mid-move between jobs, the order you do things in matters, so get advice before you hand in notice rather than after.
Contract types that need care
- Fixed-term contracts — usually fine with a history of renewals
- Zero-hours — workable with 12 months' history and consistent earnings
- Agency work — depends heavily on continuity of placements
- Umbrella company — reads more like contracting than employment to some lenders
What to have ready
- Three months' payslips, and P60s for the last two years
- Three months' bank statements
- Your employment contract, if you've recently started
- Evidence of bonus or commission history if it forms part of your income