How do banks treat bonus income for a home loan?

Find out how your lender will assess your bonus income when determining your serviceability potential during your home loan application.

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To assess your repayment capabilities, lenders will ask you to provide a wide range of information during the home loan application process, including details about your employment, income, assets, and liabilities.

Providing details of your income is easy if you’re an employee on a fixed salary who can supply pay slips and bank statements. But what if you receive money on top of your fixed income such as bonuses, commissions, allowances or overtime?

Let’s take a look at how lenders assess each type of bonus income and how you can use this income source to boost your borrowing capacity.

Sources of bonus income and how they are assessed by lenders

Depending on your occupation, you may rely upon several sources of bonus income. However, as bonus income may fluctuate from month to month, some lenders may not include this when they determine your capacity to repay a loan.

Many lenders prefer you to have a reliable and predictable source of income, so your bonus income may be disregarded when a lender reviews your loan serviceability potential.

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Bonus income home loan application tips

  • Evidence is crucial. Regardless of what type of bonus income you earn, the more evidence you can provide, the greater your borrowing power will be. Bank statements, tax returns, group certificates, letters from your employer and more can all support your case.
  • Regular is better. As a general rule, bonus income you receive regularly and consistently will be viewed much more favourably than extra money you receive haphazardly. This is because lenders like to know that you will be able to rely on this predictable source of income to help you make your mortgage repayments.
  • Choose your lender carefully. Some lenders have more flexible lending criteria than others when it comes to accepting sources of bonus income, so you may have substantially greater borrowing power with one lender compared to another. A mortgage broker will help you find the right lender for your needs.
  • Ask a mortgage broker. Mortgage brokers specialise in offering tailored home loan advice to suit your financial situation. They have an in-depth understanding of the criteria used by different lenders when assessing home loan applications, and they can help you get a loan that meets all your requirements.
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