Bonus, Commission & Overtime, How Lenders Treat Variable Income

If a chunk of your income comes from bonus, commission, overtime or shift premiums, you've probably noticed that mortgage affordability calculators seem to under-quote what you can borrow. That's because most UK lenders treat variable income more conservatively than basic salary, typically using only a portion of it, averaged over 2-3 years. Lender treatment varies, sometimes substantially. Knowing how the system works (and which lender is most generous to your specific income pattern) can be the difference between borrowing £200,000 and £280,000.

Why lenders treat variable income differently

Mortgages are long-term commitments, 25-35 years. Lenders ask: 'How confident are we that this borrower will still be earning this much in five years?' Basic salary is the most predictable answer. Variable income, bonus, commission, overtime, is more uncertain because:

• Bonuses depend on company performance and individual targets, neither guaranteed.
• Commission rates and structures can change.
• Overtime depends on workload and is the first thing cut in a downturn.
• All three can disappear entirely if you change jobs.

The typical lender approach

Most mainstream UK lenders treat variable income something like this:

• Take an average of the last 2-3 years' bonus/commission/overtime.
• Apply a percentage, typically 50% or 60% of that average, to be conservative.
• Add that to the base salary for affordability calculations.
• Verify with documents, recent payslips and P60s, sometimes employer letter.

Worked example

Take someone with: basic £40,000, plus average annual bonus of £15,000 over the last 3 years.

Lender A (uses 50% of bonus): treats income as £40k + (£15k × 50%) = £47,500 for affordability. At a 4.5x income multiple, max borrowing = £213,750.

Lender B (uses 60% of bonus): treats income as £40k + (£15k × 60%) = £49,000. At 4.5x, max borrowing = £220,500.

Lender C (uses 100% of bonus with strong evidence): treats income as £40k + £15k = £55,000. At 4.5x, max borrowing = £247,500.

Same person, three different lenders, £30,000+ difference in maximum borrowing. This is why matching your income shape to the right lender matters.

Bonus, how lenders typically treat it

Bonus rules vary, but common patterns:

• Average over 2-3 years, using P60s and recent payslips.
• Usually 50-60% counted across mainstream lenders.
• Some lenders take 100% if the bonus is contractual or guaranteed.
• Discretionary bonuses are treated more cautiously than performance-linked bonuses.
• Year 1 of new role, bonus may be excluded entirely if there's no track record.

Commission, how lenders typically treat it

Commission tends to be treated similarly to bonus:

• Average of last 2-3 years.
• Typically 50-60% counted by mainstream lenders.
• Some industries (recruitment, financial services) have lenders who specialise in commission-heavy income and may treat it more generously.
• Commission shown separately on payslips is usually easier to verify than bundled income.

Overtime, how lenders typically treat it

Overtime is the most variable category:

• Regular overtime (consistent month-to-month, like NHS shifts), often treated similarly to bonus, with 50-100% counted depending on lender.
• Occasional overtime, typically excluded entirely.
• Shift premiums for nurses, teachers, emergency services, many lenders accept these at 100% for certain professions.
• Self-employed contractor overtime, generally falls under self-employed criteria instead.

How to maximise what counts

Practical steps:

• Get 3 years of P60s and payslips ready. Lenders that use a longer average favour borrowers with consistent variable income.
• Ask your employer for a letter confirming bonus or commission structure as a regular component of your remuneration.
• Make sure your payslips itemise income components. Commission shown clearly = easier verification.
• Apply to lenders that fit your profession. Some lenders are notably generous with NHS shift income, IT contractor day rates, recruitment commission, or financial-services bonuses, others are conservative across the board.
• Use a broker. Whole-of-market brokers know which lender treats which income type most favourably. The difference between a generic application and the right lender choice can be £30,000+ in maximum borrowing.

What if your variable income is very recent?

If you've just moved to a commission-heavy role and don't have 2-3 years of history, options are narrower but exist:

• Wait 6-12 months and build evidence (most painful but cleanest).
• Find a lender that uses your latest pay run (recent commission) plus a forecast, usually conservative but workable.
• Apply on basic salary only and accept lower borrowing.
• Use a broker who specialises in irregular income, there's nearly always a lender who can help, but you may pay slightly above market rates.

If a meaningful chunk of your income is variable, the difference between a generic mortgage comparison and matching to the right lender can be £30,000+ in borrowing capacity. Debbie at DS Financial handles bonus, commission and overtime cases all the time and can route your application to the lender that treats your specific income shape most generously.

General information, not financial advice. Your home may be repossessed if you do not keep up repayments on your mortgage.

Sources: MoneyHelper, Mortgage affordability, FCA, Mortgage rules, UK Finance, Mortgage lending criteria.