Overtime Income Mortgage

Ever been asked to work overtime? The increased rate of pay means that most people want to! Whatever industry you’re in, many employers require their staff to do additional hours to their regular weekly requirement.

In fact, there are people in the hospitality, health and finance industries whose primary income is made up of overtime pay or bonuses! However only some banks accept overtime income. Read on to find out more!

Will the banks accept overtime pay?

Looking for a home loan and wondering whether the banks will accept your overtime income? This is a common question we receive. Because your income is important to the banks when they make the decision whether to approve or decline your loan, if they choose not to include your overtime earnings it will affect your ability to get approval. Most major banks have very strict lending criteria and need to see consistency in your overtime earnings in order to accept it as part of your income.

Lenders are primarily concerned with income stability, so where you cannot demonstrate that your overtime earnings are constant they will not be included as part of your income for the purposes of assessing your eligibility for a loan.

For example: If you work for a company and decide to work overtime in the months prior to applying for a loan the banks will not see this as a reflection of your gross monthly income. The overtime income must be obtained on a regular basis. Some banks need to see earnings over 2 years in order to accept your income. Others will outright refuse to accept any overtime income due to its sporadic nature.

If you are concerned about your ability to secure a mortgage, speak to our mortgage brokers on 1300 886 115 or enquire online today.

What do I need to provide if I work overtime?

In order to evidence that your overtime income is consistent, the banks may request that you supply three months worth of pay slips, or possibly a group certificate and a year to date income figure. This way they can calculate your income and determine whether you can afford the loan you require.

Working overtime

Overtime income is that which is paid when you work in excess of your agreed hours per week. Some people only do the occasional overtime shift when required. However, professions such as nurses, teachers and emergency personnel consistently work on an overtime basis. Overtime penalty rates can be quite attractive and the earnings from this work may form a substantial part of your income. This is why it’s important that the banks include it when assessing serviceability, but some don’t!

Some people only work part time if they receive overtime pay as the rates are higher. May employees earning overtime receive their pay as shift allowances. This includes can include doctors and other medical staff.

Why do some banks take that view?

If the banks were to include any overtime income that you make it would create a false representation that you regularly made that income, despite the fact that you may not be earning that same amount in the future. Lenders base your average annual earnings on all sources of your income over the last year or two, totalled with your regular salary. This way they can ensure that they lend you an amount you are capable of repaying.

How much overtime pay will they accept?

Depending on your individual case the banks will exercise discretion in determining how much of your overtime income to include. If you provide the banks with your earnings for the past two years this may prove that your overtime income is consistent. Those working in vital sectors such as emergency, health care and education commonly have their overtime income included.

Factors that will be taken into account include:

  • Type of employment
  • Duration of current employment
  • Regular hours worked per week
  • Industry you work in

Depending on your individual case the banks might include 50% of your overtime income. However, we know of lenders that will include 100% of your overtime income, depending on what industry you are in. You may only be required to present as little as three month’s evidence of working over time!

Why you should speak to us!

Leave it in our capable hands and take the hassle out of applying. Our mortgage brokers commonly deal with clients who work under a probationary period. Our knowledge of lending policies means that we’ll submit your application with the right lender to maximise approval for your employment mortgage!

Contact us on 1300 886 115 to discuss your situation. You can also enquire online and one of our brokers will contact you.