For many individuals, overtime income plays a significant role in boosting overall earnings. The good news is that some lenders recognise this and are willing to include 100% of your overtime income when assessing your mortgage application. This can significantly increase your borrowing potential, making it easier to secure the home you want.
However, lenders have specific criteria and documentation requirements to ensure overtime income is consistent and reliable. This guide walks you through everything you need to know about using overtime income to secure a mortgage.
Can Overtime Income Be Used for a Mortgage?
Yes, many lenders allow overtime income to be included in your mortgage application. If overtime is a regular and consistent part of your earnings, some lenders may consider up to 100% of this income.
This flexibility is especially valuable for professionals in sectors like healthcare, retail, or manufacturing, where overtime is often a substantial component of total compensation.
Factors Lenders Consider When Evaluating Overtime Income
1. Consistency and Regularity
Lenders assess how consistently you earn overtime income to determine its reliability. They are more likely to consider overtime if:
- You’ve worked overtime regularly over the past 6–12 months.
- Your employment contract or employer can confirm overtime availability.
Tip: Sporadic overtime may be partially considered or discounted entirely. Demonstrating a steady pattern of overtime strengthens your case.
2. Documentation Requirements
Lenders require comprehensive evidence to verify your overtime income. Typical documentation includes:
- Payslips: Showing overtime payments over the past 3–6 months.
- P60s or Tax Returns: Providing a summary of annual earnings, including overtime.
- Bank Statements: Confirming that overtime payments match your payslips.
- Employer Letter: Detailing the frequency and availability of overtime.
Tip:The more historical evidence you provide, the better your chances of lenders including 100% of your overtime income.
3. Lender Criteria
Policies on overtime income vary by lender. Some may accept the full amount, while others consider only a portion due to its variable nature.
- 100% Consideration: Lenders willing to include all overtime income typically require consistent and substantial overtime earnings.
- Partial Consideration: Some lenders average or cap overtime income at 50–75%, especially if it’s irregular.
Tip: Work with a mortgage broker to identify lenders who are flexible with overtime income, especially if it forms a significant portion of your earnings.
Steps to Secure a Mortgage with Overtime Income
Step 1 – Calculate Your Average Overtime Income
Lenders usually average your overtime income over 6–12 months to determine affordability. Use your payslips and bank statements to calculate your monthly overtime earnings.
Example:
- Monthly Base Salary: £2,500
- Average Monthly Overtime: £1,000
- Total Monthly Income: £3,500
This combined figure significantly increases your borrowing potential compared to relying on your base salary alone.
Step 2 – Gather Documentation
Prepare the following to support your application:
- Payslips showing recent overtime payments.
- P60s or SA302s verifying your total annual overtime earnings.
- Bank statements reflecting overtime payments.
- An employer letter confirming the availability and frequency of overtime.
Step 3 – Work with a Specialist Mortgage Broker
A broker experienced in overtime income can:
- Identify lenders who accept 100% of overtime income in affordability assessments.
- Present your case effectively to maximise your borrowing potential.
- Save time by focusing on lenders best suited to your financial situation.
Step 4 – Strengthen Your Financial Profile
In addition to overtime income, lenders evaluate your overall financial health. To improve your chances:
- Maintain a High Credit Score: Pay bills on time and reduce outstanding debts.
- Save for a Deposit: A deposit of at least 5–10% is typically required, but larger deposits may secure better terms.
Keep Your Debt-to-Income (DTI) Ratio Low: Ensure your total debt obligations remain manageable compared to your income.
Case Studies
1: Healthcare Worker with Consistent Overtime
Emma’s Situation:
Emma, a nurse, earns a base salary of £30,000 and regularly works overtime, earning an additional £12,000 annually.
Outcome:
Her broker identified a lender that considered 100% of her overtime income. With a 10% deposit, she secured a £200,000 mortgage, allowing her to purchase her first home.
2: Retail Worker with Seasonal Overtime
Tom’s Situation:
Tom, a retail worker, earns £25,000 annually and takes on extra shifts during busy seasons, earning an additional £5,000.
Outcome:
His broker matched him with a lender that averaged his overtime over the past 12 months. This approach helped Tom qualify for a £180,000 mortgage with a competitive interest rate.
Key Benefits of Working with a Specialist Broker
- Access to Overtime-Friendly Lenders:
Brokers know which lenders are most likely to include 100% of overtime income in affordability calculations. - Tailored Advice:
A broker can guide you through the documentation process, ensuring your application is presented in the best light. - Time-Saving: Brokers streamline the process, focusing on lenders who are most likely to approve your application.
Final Thoughts
Overtime income can play a pivotal role in securing a larger mortgage, especially if it’s a consistent and significant part of your earnings. By understanding how lenders evaluate overtime, preparing thorough documentation, and working with a specialist broker, you can maximise your borrowing potential.
Whether you’re a healthcare professional, retail worker, or contractor, the right approach can make homeownership an achievable goal.
Frequently Asked Questions
Q 1: Do all lenders accept 100% of overtime income?
Ans: No, some lenders cap overtime consideration at 50–75%, but others include 100% if the overtime is regular and consistent.
Q 2: What documents are required to include overtime income in my mortgage application?
Ans: Payslips, P60s, bank statements, and a letter from your employer confirming overtime consistency.
Q 3: How does overtime income affect my borrowing potential?
Ans: Including 100% of your overtime income increases your total assessable income, raising the amount you can borrow.
Professional Contractor Mortgage Guidance
If you’re a contractor looking for professional mortgage guidance, we’re here to help. Our specialist knowledge and lender relationships enable us to provide expert advice tailored to your situation.
Schedule your consultation today. We’ll discuss your circumstances, explain your options, and provide honest advice about the best approach for your contractor mortgage application.
