Different banks have different rules when it comes to considering overtime income. If overtime makes up a large part of your income it’s important to apply to a lender that will consider it.
This also applies to other non-regular income components such as commission or bonus income.
The higher your assessed income, the better your chance of approval for the loan amount you want.
Lenders will look for proof that overtime has been earned over a period of time.
They will want to see overtime earned for at least a 3 month period. The longer, the better.
It’s important to consider how comfortable you are that your overtime earnings will continue. This is important if will be reliant on overtime to meet your loan repayments.
To calculate your overtime income, you will need to show the lender payslips. These payslips show should a breakdown between your base salary and overtime income. They should also have a YTD (year to date) figure that shows your income over a certain timeframe.
It helps to have your previous years PAYG Summary showing what you earned last financial year. If this years payslips show you are on track to earn the same amount, this can help get your overtime accepted.
Some lenders will accept overtime income but will scale back the amount they consider. They do this by only taking into account a certain percentage of the calculated overtime. For most lenders this is set at 80% (although some lenders will only accept 50%).
Consider the example where you project to earn $10,000 in overtime. Most lenders will only add $8,000 to your base salary when assessing your income.
Some occupations may have 100% of their overtime income considered. This includes occupations such as:
These occupations are classed by some lenders as essential services. This means staff overtime & penalty are less likely to be reduced due to economic pressures.
In some industries such as manufacturing overtime levels are more likely to fluctuate.
Every persons situation is different. The right lender to help you achieve your goals depends on your own personal situation.
We would be happy to take the time to discuss your needs and which lenders may be appropriate for you. If you earn overtime income and are having trouble getting your loan approved please get in touch with us about our obligation free mortgage broker service.