For a significant number of people, commission forms part of their wages. This might be on top of a salary, or in some cases, it may account for the majority of their pay.
Commission-based structures are more common in certain sectors though, including sales, property and recruitment. If your pay includes commission, it’s important to consider how it might affect your mortgage application.
Can you get a mortgage with a commission-based job?
If your income is largely commission-based, getting a mortgage can be more complicated compared with someone on a fixed salary. However, it may still be possible.
The key is to be able to provide evidence of a consistent track record of your earnings. If you can prove that your commission is reliable, regular and sustainable, you should improve your chances.
Lenders will typically ask you to provide evidence of your commission payments. This might be for a period of two or three years, although some may be happy with less.
Some of the factors relating to your commission that lenders may consider include:
- The split between commission and salary: some lenders may be happy to factor in 100% of your commission income. However, others will be more cautious.
- How often commission is paid: commission paid regularly is generally preferred. This is because it’s easier to evidence and more reliable. If it’s paid on an ad-hoc basis or has been paid as a one-off amount, it’s unlikely to be included.
- Average value of your commission: lenders will look at your average commission payments over a set period. For example, if you’re paid commission annually, they may look at your last three years’ payments to establish an average.
To help prove the value of your commission you’ll usually need to provide formal documentation, such as:
- Payslips
- P60 forms
- A letter from your employer confirming how your commission works and whether it’s guaranteed or discretionary.
Does commission count as income for a mortgage?
This will usually depend on how much commission you receive compared to your base salary. For example, if your salary accounts for 75% of your total income, with 25% coming from commission you may find you have more options available to you. If your income is commission only, this is likely to limit your available options.
Lenders are likely to consider someone who receives a higher portion of their income as a salary as lower risk than someone who is more reliant on commission. This is because their salary will be guaranteed, whereas their commission may not be.
Changing employer, even within the same industry, could affect your mortgage application. You’d still receive any outstanding commission from your previous role, so your past commission payments could help. However, you’d also need to provide your lender with clear evidence of your new employer’s commission policy. This will enable them to make an informed decision.
How do lenders calculate commission income?
Each lender will calculate commission income in their own way. Typically, they may take the average of your last three months’ commission into account. They’ll then multiply the average figure by 12 to work out an annual figure.
However, most lenders won’t factor in your total annual commission as part of your income. Instead, they’ll consider a percentage of the total, such as 50%. They’ll then add that figure to your salary to work out your overall income. They can then use that figure to help calculate affordability.
They may also compare your most recent income to your P60. Or they may consider your year-to-date earnings to look for consistency.
Lenders ideally like to see stability or an increase in your earnings. So, if your commission has been consistent or increased over a few years, it’s likely to improve your chances.
Which mortgage lenders take commission into account?
While every lender will have their own approach, building societies are often more flexible than big, high-street banks. So, they could be a good place to start. This is because they tend to consider applications on an individual basis, rather than applying broad criteria.
At Suffolk Building Society we usually accept 75% of income earned from bonuses and commission, if you have a proven track record of receiving them.
It may also be worth speaking to a specialist mortgage broker who understands complex income. They’ll be familiar with lenders who take a positive view of commission-based income, so can help narrow down your search.
Also, having a larger deposit, for example 25%, can make some lenders more comfortable with complex income. This is because your LTV will be lower, which is less risky for the lender.
Overall, it’s possible for commission to be used for a mortgage. However, each lender will view the situation differently, based on the factors we’ve discussed above. If your total income includes a small percentage of commission, your application is likely to be simpler than someone who relies heavily on commission.
If you’d like your commission to be included in affordability calculations when you apply for a mortgage, make sure you’re clear on your preferred lender’sapproach. And if you’re unsure, speak to a mortgage adviser or broker for advice.
If you want to get started today, why not complete our decision in principle form? It only takes around 10 minutes and will give you an idea of how much you could borrow.
