Getting a mortgage can be difficult, having to prove your earnings to support the loan with the uncertainty of what will and won’t be accepted in your application.
Yes, mortgage lenders take overtime into account. However, some lenders will only take a small percentage of your overtime unless you can demonstrate that it has been earned on a consistent basis over a number of months as well as a few other factors.
In this post, I’ll run through the ways that mortgage lenders take overtime into account, as well as how to increase the likelihood they’ll accept your overtime and other income that’s taken into account when applying for a mortgage.
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How To Increase Chances of Mortgage Lenders Taking Overtime Into Account?
Most mortgage lenders when reviewing your income will take around 50% to 60% of your overtime into account. However, there are ways to increase this percentage which I’ll run through below.
Consistency of overtime. If you can demonstrate that you earn overtime on a consistent basis over at least three to six months, lenders are more like to include a higher percentage or start with a higher overtime number as part of your income. This effectively means it doesn’t significantly fluctuate from one month to the next, as if it does fluctuate, then the mortgage lenders will think that there’s a higher risk of it consistently being at the lower figure.
Proof overtime is guaranteed. Depending on your type of job, some people can earn overtime as standard. For example, jobs that require people to work outside of the regular 9 to 5 pattern such as customer-facing or support functions. Either highlight to the lender this is guaranteed overtime, or depending on how much you get paid for the overtime it may be worth asking to add this into your employment contractual hours. This will increase your basic income, all will be taken into consideration by the lender.
History of overtime. The more history of overtime you can demonstrate the better. You will need at least three to six months of payslips that contains overtime. Some lenders are also starting to accept a higher percentage of overtime if you can demonstrate it’s consistently earned over a long period of time. A lot of this depends on the lenders lending criteria and some are relaxing the rules to make it easier for people to secure a mortgage.
Which Mortgage Lenders Accept Overtime?
All lenders will consider overtime as part of your mortgage application, however, depending on their lending criteria, some lenders will take a higher proportion into consideration. Most lenders will accept around 50% of overtime.
Halifax recently doubled the percentage of overtime they allow into the income calculation to 60%. Also, some HSBC mortgage products allow up to 100% of overtime that can be demonstrated for the past two years.
If you do have a high percentage of your income that is earned through overtime and you need as much of this to be taken into account as possible, then a mortgage advisor will be best placed to help you find the right lender. If you’re currently trying to increase the amount you can borrow, a mortgage advisor will be able to review your specific circumstances, offer advice and also find a lender that can maximise the amount you can borrow.
The criteria mortgage lenders use when assessing an application can change regularly which is why mortgage advisors can be best placed to know what lenders are currently accepting. If you are thinking about contacting a mortgage advisor, this post I’ve written about the best questions to ask a mortgage advisor may be useful.
Also, remember that overtime income isn’t the only income outside of your basic salary that can be taken into account when applying for a mortgage. Even if you can’t get all of your overtime taken into account by your mortgage lender, you may be able to demonstrate you’ve got income coming in from elsewhere. I’ll explain this further below.
What Income Is Taken Into Account For A Mortgage?
If you are worried about whether your lender will take your overtime into account, here’s a breakdown of all the different types of income that mortgage lenders can take into account for a mortgage.
Even if you can’t take 100% of your overtime income into account for your mortgage application, you may have other sources of income that can help get you approved for the budget you need for your property.
| Income Taken Into Account For a Mortgage | Percentage % |
|---|---|
| Employment Basic Salary | Usually 100% |
| Self-employed profit (salary & dividends) | Usually 100% |
| Overtime/Bonus/Commission/Shift Allowance | 0% to 100% |
| Bursary / Grant | 0% to 100% |
| State Benefits (eg tax credits & child benefits) | 0% to 100% |
| Stipend income | 0% to 100% |
| Overseas Income | 0% to 100% |
| Pension Income | Usually 100% |
As you can see, there are quite a number of different types of income that are taken into account when applying for a mortgage.
How Many Times Your Overtime Income Can You Borrow For A Mortgage?
Mortgage lenders will let you borrow between 3.5 to 4.5 times your overtime income as a mortgage. This means if you can get your overtime income accepted by the mortgage lender this can have a very positive effect on the amount of money you’re able to borrow to buy a property.
However, you also have to factor in the overall multiple the mortgage lender is willing to offer as that could offset any incremental increase in the overtime income they’re willing to accept.
For example, let’s say you earn £30,000 a year with £5,000 in overtime and no other earnings, so on paper, you earn £35,000 per year. If one mortgage lender is willing to offer you 3.5 times your income and take 100% of your overtime into account, you’d be able to borrow £122,500 as a mortgage. However, if another lender is willing to offer you 4.5 times your income, but won’t accept any of your overtime so only accept £30,000, they’ll let you borrow £135,000.
Comparing the two mortgage lenders in this example, the one that won’t accept any overtime but has a higher multiple of earnings will actually allow you to borrow 10% more money. In reality this probably be won’t as clean, however, I hope you can see that even if a mortgage lender won’t accept all of your overtime, there are other ways to increase the amount of money you can borrow as a mortgage.
Summary – Do Mortgage Lenders Take Overtime Into Account?
Overall, yes mortgage lenders do take overtime into account and there are ways to increase the amount they’ll consider, such as demonstrating the consistency of your earnings.
However, whether you can include all of your overtime income in your mortgage application may not be essential and being able to increase other factors may make more of a positive impact on the total amount you’re able to borrow.
This can include things like increasing the multiple of income you’re able to borrow by going with the right mortgage lender or trying to get other sources of income accepted as part of your application.
I hope this post was helpful and has given you some useful knowledge for your mortgage application. If you do have any specific questions or are wanting advice, make sure to contact a mortgage advisor that can take you through all of your options so you can get the mortgage product that’s right for you.
Hi, I’m John. I’ve always had a keen interest in Finance, so much so that I’ve made a career out of it! This site is a place where I can share everything I’ve learned as well as give me the excuse to research certain topics.
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