Sometimes income received from employment isn’t black and white. By that we mean, sometimes people don’t just earn a clear basic flat salary. There are lots of weird and wonderful ways that people earn their money, each unique to their own industry. In this blog we are going to discuss one of the increasingly more common salary types, the heavily commission-based income job.
Commission is essentially a type of bonus, paid to employees by and employer as a reward. Often commission is a percentage of income generated for the business that the person works for. For example, a salesman might sign up a new client whose business is worth £10,000 to the business. As a reward for bringing the new business in, the employer may pay the salesman 10% so his commission would be £1,000.
Lots of jobs offer their employees performance or target-based commission or bonuses which may add a few hundred or a few thousand pounds a month on to the employee’s annual salary. But it is the heavily commission-based jobs that really make a difference, especially when it comes to getting a mortgage. We’re talking about the total annual incomes where a large amount if not the majority of the total annual income is made up of commission.
The most common example of this is salespeople who sell things like cars, boats, property etc. Often with these jobs, your basic salary is often quite low and is massively subsidised by commission income which is generally expected to be earned as part of the job. A car salesperson might only have a £20,000 basic salary but based on the number of cars they sell or car finance agreements they help to facilitate, they could earn an extra £50,000 on top of their basic salary. When it comes to higher net worth corporate business professionals, you could easily expect to see individuals with a basic salary which is already quite high and then commission income which takes them well above the £100K a year income bracket.
Getting A Mortgage For Commission-Based Income
When you earn a straight basic salary, mortgage lenders will more than likely ask for three months’ payslips as proof of income and if they are satisfied with the annual salary, they will potentially lend up to 5.5X your annual salary as a mortgage. However, when it comes to commission and high commission-based income, this can be a little trickier.
Essentially the mortgage lender just wants to be able to make sure that they can prove your income and make sure that it is as stable as possible. Where the commission heavily outweighs the basic salary or starts to total more than £100K in income, this is subject to even more scrutiny from lenders. With a lot of lenders when using a small amount of commission, they will just ask for 3 – 6 months’ payslips and work out an average of the commission to use in the affordability. And even then, they may only use a percentage of the additional income e.g. 50% potentially, subject to the lender.
When it comes to higher commission and heavily commission-based income, the lenders will need to see more evidence. Generally, they would need to see between 1- and 2-years track record of receiving the commission income. They will need to see 3 – 6 months’ worth of payslips showing commission on everyone or if you are paid commission quarterly on less frequently than monthly, you will need to provide evidence of this. They will also more than likely need to see your last year or last 2 years P60’s to make sure that your annual income figures add up to what you have said.
Will A Lender Accept 100% Of Commission Income?
Again, unfortunately there is no guarantee how much of your commission income the lender will accept as it is down to their own individual criteria and discretion, but with heavily commission-based jobs where the commission can be traced back over a long period of time, a lender may be able to accept 100% of commission and basic salary. Always speak to a mortgage advisor before trying to apply for a commission heavy mortgage as they will be able to help you find the right lender for your own income circumstances. Where a commission amount is stated as guaranteed on your contract of employment i.e. ‘Guaranteed 30% of basic salary as commission’ or something similar, the lender may be able to take this into account but may ask for written confirmation from your employer.
If you have a heavily commission-based job and need a mortgage, no matter how large or small, we are experts in commission-based lending. Call our advisor today for a free assessment and mortgage discussion.