UK Mortgages by Income Type

How do UK lenders treat different types of income?

UK mortgage lenders rarely apply 100% of variable, additional or non-employment income to the affordability calculation. Each lender publishes its own treatment for bonus, commission, overtime, dividends, rental income, lodger income, child benefit, child maintenance, and freelance / second-job income. Two applicants with identical gross-income figures can be offered very different mortgage amounts based purely on which slices each lender accepts.

Do lenders count overtime, bonus and commission?

Most do — but at varying percentages. Common treatments:

• Regular monthly bonus: 50-100% accepted (most lenders apply 50%, some apply 100% if it's contractual).
• Annual bonus: 50% applied, averaged over 2 years of P60s.
• Commission: 50-100% — same logic as bonus, with stronger requirements for evidence (12-24 months commission statements).
• Overtime: 50-60% if regular and on payslips. Halifax, Nationwide, Santander accept 100% if it's contracted.

Lenders that accept variable income at 100% (rather than 50%) materially increase your borrowing — sometimes by £40-60k. Specialist contractor and self-employed lenders (Skipton, Halifax, Saffron) are typically the most generous.

Can I use rental income to support a mortgage?

Yes, in two distinct ways. Existing buy-to-let income can be counted as supporting income on a residential mortgage by around 20-25 lenders; most apply a 6-month average of declared rent net of mortgage interest. Lodger income (Rent-a-Room) is more restrictive — only around 8-12 lenders count it, and most cap it at the £7,500 tax-free threshold. Holiday let income is a specialist case (Hodge, Furness BS, Family BS).

Will lenders count benefits, child maintenance, or pension income?

Child Benefit and Child Tax Credit: around 20-30 lenders accept, usually at 100%. Universal Credit: mainstream lenders increasingly accept (Halifax, Nationwide, Skipton). PIP / DLA: typically accepted by most lenders provided it's long-term. Child maintenance: accepted by ~15-20 lenders, usually requiring a Court Order or CSA arrangement, often at 50-100%. Pension income: universally accepted for lending into retirement; rules vary by age at term-end.

How much can I borrow on dividend income?

For limited-company directors, most lenders use salary + dividend taken (drawn) over the latest 1-2 financial years. A growing minority of lenders also accept retained profits in the company (Halifax, Nationwide, Saffron BS, The Mortgage Lender) — which can dramatically increase borrowing for owner-managers who deliberately leave profit in the company for tax reasons. Without a retained- profit-friendly lender, your borrowing is limited to your personal drawn income.