commission payments - how does a lender treat them?

brians_daughter

My sister is looking into buying her own home but is on a mixture of salary plus commission.

Currently her income is split 50/50 basic wage/commission. 25k/25k

Shes earned these levels in the same role for the same company for the last 10 years. She has looked at previous P60's and her income has risen from 20k basic/20k commission to 25k/25k in that time.

How would a lender (as a rule of thumb) consider the commission? My step-dad seems to recall when he applied for his most recent mortgage the lender would only take 50% of the commission into account?

Shes looking at a 95% mortgage, mainly due to circumstance Don't know if this impacts the commission questions below, but better to add to much than too little information.

She realises all lenders will have different criteria, but just wondering if...

A. Theres a 'norm' for commission payments ie Only 50% will be taken into account or usually its between x and y %

B. Theres any lenders that look upon commission more favourably than others?

TIA
Anna

kingstreet

50% is the typical amount of non-guaranteed variable earnings allowed. Some lenders, being able to see three years' P60s and continually increasing total earnings, may allow more.

As there are lenders who will offer 5x income, would 5x £37,500, or £187,500 not be enough?

What's the desired purchase price? This may not be available at 95%. What credit commitments and credit history does she have?

brians_daughter

Hi there, thanks for the swift response. As usual on MSE it's not straight forward lol

She's looking for very little really mortgage wise. Maybe £100k max. she just wants a small house that will put her on until the other house is sold then she can pay off a large portion of the new mortgage off when any tie in periods have expired.

She's got 11k of cc debt - this is why she is moving! Her hubby was a named party on her cc's and she's recently found out he's got gambling problems and spent 18k on cc's. She's paid over 6k off one with her savings (as it wasn't interest free) leaving her with 11k. The minimum repayments are 5% (its over 2 cards if that matters?)

No other commitments apart from car insurance (£44 cpm), mobile phone contract (£15 pcm) and gym membership (£15pcm).

Parents have said they will help anyway they can i.e. lend her the £ to clear the cc debt until the joint home is sold but she is reluctant to do this for many reasons. She's got 8k sat in the bank so fees plus 5% really.

Credit reports she's got experian and equifax and theres no missed payments etc as everything is direct debit.

We all know she should wait until she's got a larger deposit or house is sold etc but she's living in my box room at the moment and my kids have been sharing so she can stay.

I'm tempted to loan her the money myself, but i wish to move after summer myself and theres no saying her old house would be sold by then. The marital home is only in her husbands name so she's not named on a mortgage but they have reached an agreement via a solicitor regarding 50/50 profit split.

Anna