What is my "salary"? Also general advice appreciated

isa484

That might sound like a stupid question! I want to know what a mortgage provider will consider my salary to be.

My basic salary is £35,950. I get a bonus which varies between £2,000 and £4,000. On top of that, I get RSUs each year which vest at 25% a year. At the current share price is about £18,000 a year.
Both the RSU sales and bonus and stuff all come up on my payslip. My P60 has my total income as the highest number - salary + bonus + RSUs.

There's obviously a massive difference between £36k and £55k. Which number will a bank consider to be my salary? I think since shares and bonus are unpredictable, they'd only look at my basic salary - but online mortgage calculator tools say I should include bonuses and overtime in the number.

My situation: I'm a first time buyer -- I haven't made an offer yet, but I have found a house I like. I expect I will offer between £140k-£150k on it. I have only £17k deposit (I have £27k in savings but I want to hold back £10k for costs and contingency), which is roughly 10%.

I've heard 3.5 times salary is a bit of a magic number. Asking for 90% mortgage and more than 3.5 times salary seems risky. If I end up needing £133k mortgage, that's 3.6x my base salary. If on the other hand a bank will consider my RSUs and bonus, it is much more safe for the lender.

I would really appreciate some input. I understand also that some mortgage providers are more "lenient" than others. Could someone recommend one? I bank with HSBC and they've been good to me, but have heard they're very picky with mortgages. I have an excellent credit ratng and £400 in outstanding debt from a personal loan that'll be paid off in a couple of months. I could have settled it early long ago, but I didn't because quite honestly I couldn't be bothered. And paying down this loan every month has probably helped my credit score, since I don't use any other credit.

I'd love to hear any general opinions and advice, as well as an answer to my question.

Many thanks in advance.

Dave_Ham

You will be absolutely fine, every bank is different.

Not sure about HSBC, probably a yes but elsewhere you will get what you need so do not worry...

isa484

Well, thank you

I have an agreement in principle from HSBC, but all I did was put in my (basic) salary online. They didn't credit check or speak to me, so I wonder about its validity.

robatwork

They will probably want to see evidence which may take the form of past payslips, and certificates you get for options, or a form that your director will need to fill in. But it should be acceptable if it's been regular.

lizards

Great question, and thank you for asking it as we're in a very, very similar situation with my husband's salary. Very glad to hear they take the regularly vesting stock units etc into account. Does anyone know if they use the pre tax figure for the current share value or the take home post-tax value as obviously this could make all the difference?

Also I hope you don't mind if I add a further question! My husband had a promotion a few months back which gave him a significant payrise, meaning his bonus for next year will be rather larger than in previous years, although we won't have a fixed figure for it until Christmas (it is paid in January) Unlike with the new salary, you would only see the difference on the one payslip when it is paid, and on the P60.

Do lenders only take into account previous years' P60s indicating an obviously smaller bonus, or are they "human" enough to understand that the bonus will be bigger this year.. especially if supported by documentation giving the rough bonus guidelines and the new higher salary?

Thank you and sorry for piggybacking!!

Dave_Ham

lizards wrote: »

Great question, and thank you for asking it as we're in a very, very similar situation with my husband's salary. Very glad to hear they take the regularly vesting stock units etc into account. Does anyone know if they use the pre tax figure for the current share value or the take home post-tax value as obviously this could make all the difference?

Also I hope you don't mind if I add a further question! My husband had a promotion a few months back which gave him a significant payrise, meaning his bonus for next year will be rather larger than in previous years, although we won't have a fixed figure for it until Christmas (it is paid in January) Unlike with the new salary, you would only see the difference on the one payslip when it is paid, and on the P60.

Do lenders only take into account previous years' P60s indicating an obviously smaller bonus, or are they "human" enough to understand that the bonus will be bigger this year.. especially if supported by documentation giving the rough bonus guidelines and the new higher salary?

Thank you and sorry for piggybacking!!

Very unlikely, most average out previous bonus paid...