Two people with the same total earnings can be offered very different amounts, because lenders do not all count income the same way.
Income is only part of affordability
Modern affordability assessments look at what you earn alongside what you spend and what you already owe. A lender will typically also test whether repayments would remain affordable if interest rates were higher than they are today.
Basic and guaranteed income
Basic salary is usually the most straightforward element and is generally counted in full. Guaranteed or contractual allowances such as a car allowance or shift allowance may also be included, depending on the lender.
Variable income
Bonuses, overtime and commission are treated with more caution because they are not guaranteed. Lenders differ in how they handle them:
- Some average the last two years; others use the most recent figure, or the lower of the two.
- Some count only a proportion of variable income rather than all of it.
- Some distinguish between regular monthly commission and an annual bonus.
Self-employed income
Self-employed income is assessed differently again, and depends on how the business is structured.
Contract and day-rate work
Some lenders can work from a day rate, often annualised over an assumed number of working weeks. Others will look for filed accounts instead. Contract length and renewal history can both matter.
Other income
Pension income, rental income, investment income, maintenance payments and certain benefits may be considered, but the treatment varies widely between lenders — including whether the income is counted in full, in part, or not at all.
Because these approaches differ so much, the same set of payslips can support noticeably different borrowing figures depending on which lender assesses them.
Your home may be repossessed if you do not keep up repayments on your mortgage.
