Complex Income Mortgage
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Author: Elliott Culley - Director & Mortgage Adviser of Switch Mortgage Finance
Complex Income Mortgage
Elliot Culley talks to us about mortgages for those with complex income.
What is considered as complex income with mortgage applications in the UK?
Complex income for a mortgage can include quite a few different types of income. Essentially, not all lenders treat income outside of your basic salary the same.
Complex income could include bonuses, commission, overtime, working in two roles, locum income, income from investments, rental income, and potentially benefit income as well.
How do lenders assess different complex incomes and how do they impact the mortgage assessment process?
Mortgage lenders all assess complex incomes differently. For example, if you earn commission, you may find one lender will use 50% of that income over a 12-month period, whereas another may take a higher percentage – potentially 75%, provided you can show consistency over a longer period of time.
Some mortgage lenders don’t allow certain incomes to contribute towards affordability at all. So you can often find that the amount of borrowing you can get is wildly different with each mortgage lender. So it’s really worth checking with a few lenders to decide.
What documentation and evidence do I need to provide to prove my complex income?
It does depend on the type of income, but the majority of lenders want to see consistency. For example, with overtime, lenders will look at the income on your last three payslips, but they will also look at your P60 or year-to-date figure to see if that’s consistent with the rest of the year.
If you have commission paid on a quarterly basis, lenders will likely want to see your last four commission payslips at the very least. If you’re working two separate roles, lenders want to see sustainability – they will want you to have been in both roles for six months, although some may look at just three.
The key point is that whatever the income is, lenders need confidence that the income will be sustainable for the duration of that mortgage.
What challenges might arise during the mortgage application process when declaring complex income?
Because all lenders treat that complex income differently, finding the right lender for your circumstances is probably the most challenging part. You’ll want to find the most suitable rate available but also the right amount of borrowing.
The difference in borrowing capacity between lenders can be really huge. So it’s important not to just speak with one lender, but approach quite a few because those figures change significantly. You don’t simply need to find the right rate, because that lender might not be offering you the right amount for your circumstances.
How do I improve my chances of getting approved for a mortgage with complex income?
Consistency of income can really improve your chances of approval. Lenders can get worried if one month you’re earning really high commission or overtime, and the next month is very low in comparison.
Without consistency, the lenders may just take 50% of that income, to reduce the risk, or not even take the income at all. Making a lender feel confident in the income is really important in maximising your borrowing capacity.
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Do many mortgage lenders specialise in mortgages for customers with complex income?
Many lenders do specialise in offering mortgages when you have complex income. But many high street lenders can also support some of the complex incomes I’ve mentioned. They might just not take 100% of those incomes, or want proof of sustainability over a longer time.
Specialist lenders may take lots of different types of incomes and combine them all together. They could be helpful if you really did have lots of different types: commission, bonus, perhaps rental income and a second job. Or, if you haven’t earned some income types for very long, you may need a specialist rather than a high street lender.
How can I calculate my borrowing capacity when I have complex income? Does it differ from regular income?
I would class regular income as your basic salary, and every lender will take 100% of that. The lender will take that basic pay as the starting point.
How other income such as bonuses, commission or overtime is treated will depend on the lender. Some will take 50%, some could take 100%, some could take 65%. It really can differ.
Most lenders then take that total combined figure and multiply it by 4.5 to get you a total borrowing figure. Some lenders can go higher than this. If your income totals more than a certain amount, that might trigger them to multiply your income by five, increasing the amount they will be willing to lend to you.
Bear in mind that they’ll also take your credit commitments into account, and any dependents as well. That can then reduce the total borrowing figure down a bit.
How can a mortgage broker help here? Anything else you’d like to add?
Preparation is very key here. I’ve helped clients before who have been earning commission, but perhaps haven’t yet received that for long enough. They wanted to understand more about the differing borrowing amounts with various lenders.
Speaking to an advisor can be really helpful in this situation, because the amount you can borrow really does differ from lender to lender. We save you a lot of time – you won’t need to go through the same conversations with different lenders to get that figure.
We make it much quicker and simpler to explore all your options and decide how to proceed.
Key Takeaways:
- Complex income includes bonuses, commission, overtime, income from two roles, locum income, investments, rental income, and potentially benefit income.
- Mortgage lenders vary significantly in how they assess complex income, with some taking as little as 50% of income like commission or not allowing certain incomes at all.
- Lenders prioritise consistency and sustainability of complex income, often looking at your P60 and multiple payslips to maximise your borrowing capacity and improve your chances of approval.
- While many high street lenders can support some complex incomes, alternative lenders may be necessary if you have many different types of complex income to combine or if you have not earned some income types for very long.
- Speaking to a mortgage broker is key; they can quickly explore all your options and save you time by comparing the differing borrowing amounts available from various lenders.
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