Dave Tindall, CeMAP
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Automotive industry mortgage specialist.
Making the most of your commission income!
Getting a mortgage with commission and bonus income
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As a car sales executive, you know how to close deals, but when it comes to getting a mortgage, the banks don’t always see your true earning potential. With a low basic salary and fluctuating commission, many lenders underestimate your affordability, making it harder to secure the mortgage you deserve.
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The nature of the automotive industry can make your life more difficult, with lower earning months in February, August and December offsetting the benefits of successful months in March and September.
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The good news is that it’s possible to secure a mortgage using your commission income - if you know where to look!
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Can I get a mortgage using commission income?
Yes! Most lenders accept commission income when deciding how much to lend to you.
However, when it comes to getting a mortgage with a commission based job, picking the right lender is crucial. Differences in how each lender assesses your income could result in a range of tens of thousands of pounds when they decide how much to lend to you. This could make all the difference when trying to buy your dream home!
Who are the best mortgage lenders for commission based income?
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The best lender and mortgage product will be unique to your circumstances. Factors that will be taken into consideration are:
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Consistency of monthly commission income – generally this will be assessed over your last three month’s payslips, and may be cross referenced with your YTD or latest P60 earnings​
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Quarterly commission or bonus – if received, a lender may allow this income, and will look back over previous quarters to understand how consistently you earn it
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Other sources of income for the application – if you are applying for a mortgage with another person who has a more consistent income
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Affordability – if you need to maximise your borrowing, then the lender who uses the most commission will be right for you, however if you have a sizeable deposit or equity, a better rate may be available with a lender who will assess less of your variable income
What can I do to increase my chances of securing a mortgage?
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Along with general tips to improve your mortgage application, such as managing your credit score, there are some specific steps that as a car sales executive you can take to improve your chances:
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Consistency of income is key – lenders are concerned about whether you can afford your mortgage repayment after a low earning month, so doing all you can to earn well in February, August and December will benefit your application. If you can focus on used cars, F&I income, or a high value new car delivery in these months it will help secure a mortgage.
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Manage your outgoings – lenders will assess your outgoings as well as your income, particularly contractual finance agreements. Although you may be able to afford to make purchases on credit based on your higher earning months, these costs will still be assessed for your lower earning ones. If you can reduce, avoid, or pay off these agreements it will increase how much you can borrow!
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Reduce car benefit scheme payments – if you use a car benefit scheme, the monthly deduction will show on your payslip and will be assessed by lenders. If you can choose a car with a lower monthly repayment, you’ll increase your borrowing potential.
How three lenders will assess your income differently
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To demonstrate how crucial picking the right lender is, this is how three well known banks currently assess your income:
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Lender 1 - Uses a minimum of 50% of monthly commission, up to a maximum of 100%, using three-month average if backed up by most recent P60 figure. Capped at 100% of your basic salary.
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Lender 2 - Uses 60% of the lowest monthly commission from the last two months, or 60% of the year-to-date figure if lower.
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Lender 3 - Uses 100% of monthly commission and can accept 100% of quarterly commission/bonus as evidenced by the last four quarterly payments, if supported by the year-to-date figure.
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At first glance, lender 3 may seem the best choice. But if lender 1 or lender 2 has a significantly better interest rate, and your earnings will support an application, then you could save money with them!
How I can help you
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As you can see, buying a house with commission based income can add complexity, but with the right advice you can still secure a mortgage and your dream home!
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Before becoming a Mortgage & Protection Adviser, I spent 16 years in the automotive industry. Working in management for a dealer group, I have an in-depth understanding of your commission plans and monthly targets, so know how to make the very most out of your income!
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If you’d like to understand how much you could borrow, get in touch and we can arrange a no-obligation chat.
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