Overtime Income Mortgage

2011 February 19

Female workerMany employees depend on overtime as a large part of their income, especially when employed in essential service industries. Overtime can vary dramatically from week to week, however there are some industries in which working long or unusual hours is actually the rule, rather than the exception. This means that your income from the extra hours can be relied upon to make your mortgage repayments.

Lenders generally see overtime as different to a base wage or salary and in many cases can be fairly conservative, often not including it when assessing your ability to afford a home loan.

You can qualify for a home loan! The secret to getting your overtime income considered as part of your borrowing capacity (serviceability) is to apply with a lender who can accept your overtime income. Speak to a mortgage broker such as the Home Loan Experts who specialise in overtime income mortgages.

What effect can overtime have on my borrowing capacity?

Your serviceability can be drastically affected if a large portion of your income is received as overtime.

  • Most banks: Do not include overtime income or only use 50% of your overtime income, even if you can prove that you have received it regularly for several years.
  • The least conservative lenders: Require just a three month history of earnings to use 100% of your overtime income.

Are you employed in an area classified as an essential service?

Employment classified as essential services can have up to 100% of your overtime considered by more lenders. Some examples of these include:

  • Education
  • Police, Fire and Rescue
  • Emergency Services
  • Healthcare – Nursing in particular is readily accepted
  • Utilities such as Water and Electricity
  • Waste Management

Please talk to a mortgage broker such as the Home Loan Experts about your overtime income mortgage application.

What overtime income and documentation will lenders accept?

As overtime payments in general are fairly irregular, lenders can be conservative when considering overtime income as part of your ability to service a loan. Loan applications are usually assessed on a case by case basis and are dependent on such variables as:

  • The type of employment
  • The industry you work in
  • Your number of regular work hours
  • You stability of employment such as length of time in your current job

It is unlikely your loan will be approved if you are still on probation with your employer, unless you apply for a probation mortgage with a lender that does not consider being on probation to be a high risk.

The least conservative lenders can accept:

  • A 3 month minimum history of receiving overtime.
  • Up to a maximum of 70 hrs / week in total hours worked at 100% overtime income consideration.
  • Either a group certificate, YTD income figure or 3 months payslips as evidence of your overtime. This involves presenting your loan to a lender that works with the evidence provided.
  • Employees from all industries such as mining, hospitality, trades, construction and hospitality, just to name a few.

What loans are available what features can I use and how much can I borrow?

Overtime income mortgages can use all types of loans such as basic loans, professional packages, fixed rates and lines of credit. You can typically borrow up to 90% of the property value and as much as 95% for applicants the lenders consider a lower risk.

Can’t afford the deposit? Don’t worry, you can also apply family pledge home loan to borrow up to 100% of the property value. For this to be an option, you will need your parents to support your application.

Who may apply for an overtime income mortgage?

Employees from all industries may qualify for an overtime income mortgage. Examples of forms of employment include sales assistants and truck drivers working nighttime hours, to caterers and mining staff working weekend shifts, and many more.

Do you qualify for a home loan?

Mortgage brokers can provide invaluable insight into how lenders will view your application. To find out more information on this topic you can contact the Home Loan Experts through their overtime income mortgages page.

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