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    Are you in the market to buy a home but much of your income comes from commissions or bonuses? Have you unhappily discovered that your mortgage eligibility is falling short of your expectations?

    Don’t worry. The bank may turn you down based on how much your main income is, but that does not always mean you have to rush out a get a second job. Extra income from overtime, bonuses or commission could be the key to securing a larger loan. Aseem Agarwal, Head of Mortgages at Global Finance, explains how.

    Making the most of your main job

    “What we sometimes see are people who are working full time, but that may not be sufficient for them to get the loan.” However, Aseem adds, “If the nature of the job is such that they also do a lot of overtime, or they get a commission because they are in an executive or a sales role, the bank can take up to 80% of that income earned over and above the base salary in the last 12 months or calendar year, and that can boost someone’s ability to borrow more.”

    He illustrates this with an example: “The base salary would allow them to borrow a certain amount, let’s say X, but with the inclusion of the overtime or commission, the loan amount that they will be eligible for can go to Y and that Y would be greater than X.”

    Opportunities in sales and executive roles

    Individuals with fluctuating incomes, such as people on contracts or those in sales or executive roles who earn bonuses, need not be disadvantaged by their variable earnings. “It is probably good to know that just because you have a fluctuating level of income doesn’t mean that the bank will disadvantage you”, Aseem tells us. He then adds, “In fact, as long as you can prove that the fluctuation allows you to earn more than your base salary, and in no way prevents you from earning what you are contracted to earn as per minimum base salary, the additional income can actually work to your advantage and make you eligible for extra lending from the bank.”

    Moving beyond the base salary

    When applying for a mortgage, it’s common for applicants to present their payslips. However, these primarily focus on the base salary. Aseem suggests that in order to maximise their borrowing capacity, potential homebuyers should take a proactive approach and present the full financial picture. They should highlight their additional income.

    Proactive strategies to get what you want

    The first step would be to see a mortgage broker. He states, “We talk to the customer, we look at the nature of their profession and we say, “do you earn over and above this base income?”. If yes, what component does it constitute? Is it overtime? Is it a bonus? Is it a commission? Is it a performance incentive? How long have you been earning it?” Most banks typically accept 80% of these earnings from overtime and commission and these can play a crucial role in increasing your borrowing capacity without the need for a second source of income.

    How much overtime and commission can be included does differ from lender to lender, and in some cases, it is based on the average earnings in the past 3 or 6 months. There is more difficulty in calculating how bonuses can be included, as they are not accepted by all banks, but normally, we can include 80% of total bonuses.

    Our team can work with you to provide a comprehensive overview of your earnings when you apply for a mortgage. If you can provide IRD summaries confirming you have been consistently earning above your base salary, it will certainly help your case.

    One job, just one job ….

    If much of your income comes from commission or bonuses, you may be wondering if you’ll be able to get a mortgage based on your full income from just one job, and this is when a mortgage broker can be most useful. We don’t work on a one-size-fits-all solution for home loans. We will look at your case, understand your needs and situation and then put together a tailored solution to help you to make the most of your primary employment.

    We’re financial specialists with access to all the banks and we understand their requirements and know how to negotiate, which maximises your chances of getting the mortgage you want. Call us on 09 255 5500 or email info@globalfinance.co.nz to chat with one of our mortgage advisors. We’re more than happy to help.

    The information and articles published are true to the best of the Global Finance Services Ltd knowledge. Since the information provided in this blog is of general nature and is not intended to be personalized financial advice. We encourage you to seek Financial advice which is personalized depending on your needs, goals, and circumstances before making any financial decision. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or its employees liable.