Your Bonus will Maximise your borrowing potential
Many banks and building societies have different rules when it comes to using bonuses to support your income. Bonuses can increase your borrowing levels significantly. We have seen some of our clients achieve £200,000+ in additional borrowing based on approaching the right lender and using the latest year bonus figures.
Mortgage lenders work on the basis of affordability calculations to determine the maximum amount that you could borrow. A bonus can be a significant income uplift, but some mortgage lenders can apply strict rules on using bonus income when it comes to maximising how much you could borrow.
It can be a bit of a lottery (if you don’t contact a broker) trying to find the right lender who will accept your latest year bonus figure and you don’t want to be applying with multiple banks and building societies to see which one is the best as this could impact your credit rating.
Even if you find a lender online who says they will take 100% of your bonus, it is never as straightforward as this. Other caveats always apply. Our mortgage experts will know who to approach based on your personal circumstances and we will process your mortgage free of charge.
The two-year rule
Most mortgage lenders have a two-year rule when it comes to bonuses. They will want to see evidence in the form of payslips and a P60 showing the bonus being paid over the last two years. Even with that proof, some lenders will average your bonus figure over the two years and only count the average figure towards your mortgage affordability.
The 50% rule
Whilst some mortgage lenders average your bonus income, others will only take 50% of any bonus received into consideration for affordability purposes. There are even some mortgage lenders who will not only take a two-year average, but then also apply the 50% rule.
Some lenders like to be even more different. For example, Santander could apply a three-year assessment and 65% rule to your bonus income. This means that they may need proof of your bonus (via your P60 or payslips) going back three years and they will only use a 65% average of your bonus income in their assessment. If you don’t have a three-year history this could lead to your application being declined.
Who are the best mortgage lenders for 100% bonus income?
Over the years there are a few lenders that have remained consistent with their lending policy when it comes to accepting bonus income.
The best mortgage lenders for bonus income are*:
The lenders mentioned above all have caveats connected to their 100% bonus lending criteria. Our brokers will be able to determine the most suitable mortgage lender for you and we don’t charge a fee to process your mortgage.
In order to work out who the best lender for bonus income would be for you, we would need you to quickly complete our questions. Then one of our experienced mortgage advisors will match the cheapest and most suitable mortgage lender.
Article written by Ben, Glow Mortgage Advisor (CeMAP, BSc Hons)
First Published: 12th June 2018
Updated: 9th March 2020.
*Correct at the time this article was published. Regularly monitored and updated.