How much overtime per month is sustainable income in a mortgage application?

AndyDufresne

Please can someone give an idea of what level of regular (non guaranteed, non contractual) overtime is considered sustainable income?

I.e. how many hours per week? Is a constant 60  (40 contracted hours) considered sustainable if worked every week?

When the lender looks for evidence of this, is it just the last 3 months of payslips, or just the P60? Or both?

Thanks

K_S

@AndyDufresne There's no universal approach to how lenders consider monthly overtime.

For example lender 1 might consider average of most recent 3 payslips and take 50% of it for affordability. Lender 2 might take the lowest of the most recent 3 payslips X 12 and take 100% of that for affordability. On top of that, some lenders will compare to the YTD figures on payslip (or most recent P60) to confirm that recent earnings aren't wildly above the trend. 

Which approach allows an applicant to potentially maximise borrowing will depend on the specifics.

AndyDufresne

K_S said:

@AndyDufresne There's no universal approach to how lenders consider monthly overtime.

For example lender 1 might consider average of most recent 3 payslips and take 50% of it for affordability. Lender 2 might take the lowest of the most recent 3 payslips X 12 and take 100% of that for affordability. On top of that, some lenders will compare to the YTD figures on payslip (or most recent P60) to confirm that recent earnings aren't wildly above the trend. 

Which approach allows an applicant to potentially maximise borrowing will depend on the specifics.

Would you be able to suggest what you commonly see with your clients that do regular overtime (and how the lender sees it)? Do you get clients that do 60 hour weeks very often?

K_S

@AndyDufresne Sorry if I wasn't clear. What I was trying to convey is that there isn't a universal approach. Plus when it comes to sustainability there can be an element of subjectivity to it.

Which lender's approach best suits the applicant will depend on the specifics of their earnings, how far back it goes, their borrowing requirements, etc. 

Like most other brokers, I do get clients with all sorts of variable income components - weekly/monthly/quarterly/annual Bonus/Overtime/Commission. With clients earning consistent OT, it's not always evident on their payslips that they're doing X hours in total but if it meets the lender's evidential requirements there's no reason to worry too much about whether or not you'll be knocked back on how many hours you're doing a week.

The lender expects fluctuation in variable income components, hence why most mainstream lenders will only take a portion (30/50/60% etc depending on the lender) of it for affordability calcs if it can't be evidenced over the long term.

AndyDufresne

K_S said:

@AndyDufresne Sorry if I wasn't clear. What I was trying to convey is that there isn't a universal approach. Plus when it comes to sustainability there can be an element of subjectivity to it.

Which lender's approach best suits the applicant will depend on the specifics of their earnings, how far back it goes, their borrowing requirements, etc. 

Like most other brokers, I do get clients with all sorts of variable income components - weekly/monthly/quarterly/annual Bonus/Overtime/Commission. With clients earning consistent OT, it's not always evident on their payslips that they're doing X hours in total but if it meets the lender's evidential requirements there's no reason to worry too much about whether or not you'll be knocked back on how many hours you're doing a week.

The lender expects fluctuation in variable income components, hence why most mainstream lenders will only take a portion (30/50/60% etc depending on the lender) of it for affordability calcs if it can't be evidenced over the long term.

That makes sense, thanks for explaining

Thrugelmir

Depending upon the nature of your employment. Then a consistant 60 working week may well be viewed as unsustainable. Eventually will take it's toll. 

ACG

I do not like questions like this. I back out of applications like this as it is not worth me getting roped into people staging their income, im not suggesting that is the case btw. 

To answer your question though, I have placed people who have 2 full time jobs. I very nearly turned the case away but he had a plausible explanation for it and had been doing it for over 12 months.