Mortgage lenders ready to consider overtime and bonuses

Halifax has relaxed its mortgage lending rules regarding bonuses and commissions. Kate Anderson takes a look at how this could affect you.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

a couple embrace in front of their new home

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Getting approved for a mortgage can be a nervy time. There are several hoops to jump through, with the final hurdle being the affordability test. So what if I told you that some lenders have increased the amount that workers who receive financial perks on top of their base pay can borrow?

Yep, that’s right. The likes of Halifax have relaxed their lending rules to allow employees whose income is made up of bonuses and commission to apply for a mortgage more easily.

Interested in knowing more? Let’s take a look.


What’s changed?

If you have gone through the mortgage application process, then you will know that lenders allow you to borrow four to five times your salary. The catch is what they class as ‘income’.

Some will include your base salary and only half of the amount generated by commissions and bonuses. During the pandemic, a lot of mortgage lenders cut how much extra perks would count towards the overall affordability assessment. This was purely because they were worried that commission and bonuses would be the first thing to go.

The good news is that lenders are now starting to reverse this policy. Halifax has announced that perks including commission, overtime and bonuses will be factored into a revised affordability assessment that will double from 30% to 60%.

What does it mean for getting a mortgage?

It’s good news if your additional income fluctuates. It means that you have a better chance of passing Halifax’s affordability assessment with ease.

But it’s important to understand that Halifax is just one lender. As always, it is worth shopping around to try to find the best deal for you. While it’s useful to know that Halifax is willing to lend more based on flexible income, that doesn’t necessarily mean it’s your only option.

Using a debt-to-income ratio calculator can help you to get an idea of how you would perform in an affordability test. It will add up all your recurring debt payments, plus some additional items such as child and spousal support. This is then expressed as a percentage of your income.

However, if you want to get a real idea of how much you could borrow, a mortgage broker could help you out. If you don’t already have a broker, then you can find one through the online directory,


How can you get yourself mortgage ready?

Making sure you secure the best mortgage deal can be a challenge. But there are some things that you can do to pave the way:

  • Have three recent payslips and/or bank statements ready to show. If you have evidence of bonuses and commissions you have received, it may also be a good idea to have it to hand.
  • Reduce your liabilities (e.g car finance, loans, credit card debt and childcare costs).
  • Consider your spending patterns and have a think about anything that would give a lender cause for concern.
  • Save up the largest deposit you can. A large deposit usually means a lower interest rate and a smaller mortgage.
  • Check your credit score as this is something that lenders will take a look at.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »