When you’re applying for a mortgage from a bank, your mortgage affordability will be used to calculate the maximum mortgage size you can take out. This is often done using a simply bank calculation, e.g. 4 x your salary. But if your income isn’t straightforward – say because you have bonus income – it can be difficult to know what the maximum mortgage you can borrow will be.
Bonus income can often make up large parts of an employee’s salary, and it’s not only bankers and other finance industry professionals who receive them. Solicitors, accountants and even doctors can receive bonus income by way of a rewarding successful year and/or an incentive to keep a good employee at a company.
Many high-earning individuals therefore look to use their bonus income when calculating what size mortgage they can afford. However, this can be a complicated process as mortgage lenders have different criteria as to what/and how much bonus income they will accept when calculating your mortgage affordability.
If you have been with the same company for a long time and have a good bonus history it is likely most lenders will look upon this favourably, and be prepared to take a large amount of your bonus into consideration. Most high-street lenders will want to see a 3-year history; however some lenders will look favourably on 2-year history or even just one year’s bonus.
What if my bonus income has been disrupted?
Not all clients who receive bonuses have a perfect track record. It may be that you have recently moved company and you only have one year’s bonus at your new company, but a good track record elsewhere. Most high-street lenders will not look favourably at this scenario, but there are specialist building societies and lenders for professionals that have the potential to look at the bigger picture and look more positively at your requirements.
How much of my bonus do mortgage lenders take into account?
If you want to make your bonus stretch as far as possible to afford that dream home, different lenders will use different percentages of the bonus in their multiples. Most lenders will max out at 50% of a bonus as it isn’t guaranteed income but again, due to our relationship with specific lenders we can look to use 75% or even 100% of a bonus being paid.
Whether you have just been paid your first bonus and are looking to get on the housing ladder, or have been with the same company for some time with a bonus track record, speaking to a broker can help to maximise your bonus when applying for a mortgage. Enness has developed excellent relationships with numerous lenders in order to make sure our clients make the very most out of their specific bonus and bonus history.
We have a proven track record of doing so. We’ve helped clients secure mortgages with complex bonus income, and also assisted clients who needed to take 75% of their bonuses into account. We’ve even helped clients who were anticipating bonus income. For example, the Enness Private Office team recently helped a client who had recently started a job in which he could expect to earn significant bonus income, which would be needed to support the high level of borrowing he required.
For a consultation on how we can make your bonus work best for you when applying for a mortgage, please get in touch with one of our expert brokers.