How Lenders Treat Bonus Income — and Why It Matters
Mortgage lenders broadly fall into three camps when it comes to bonus income. The first group — which includes many of the biggest high street names — will only count a banker's base salary for affordability purposes. For a vice president at an investment bank earning £120,000 base and £200,000 in annual bonus, this approach would typically cap borrowing at around £480,000-£540,000. That may not be remotely sufficient for the property they actually want to buy or already own.
The second group of lenders will include bonus income but apply a significant discount — commonly accepting only 50% of the most recent bonus, or an average of the last two years at a reduced rate. This approach is better than ignoring bonuses entirely, but still dramatically understates income for high-earning finance professionals whose bonuses have been consistent and growing.
The third group — a smaller set of specialist and private bank lenders — will assess bonus income properly. They will look at a banker's payslips, P60s, employment contract, and bonus history, and make a rational judgement about the sustainable income level. For those with two or more years of consistent bonuses, these lenders may count the full average bonus alongside base salary, unlocking significantly higher borrowing amounts.
The practical difference is stark. A finance professional with £120,000 base and £180,000 average bonus might be able to borrow £540,000 with a mainstream lender but £1.2 million or more with a specialist lender that counts total remuneration properly. That is a life-changing difference in what they can achieve when remortgaging — and why specialist broker advice is essential for banking professionals.
Deferred Bonuses, Guaranteed Bonuses, and Discretionary Structures
The structure of bonus arrangements within banking varies considerably, and lenders treat different structures differently. Understanding how your specific remuneration package will be assessed is critical before choosing which lender to approach.
Guaranteed bonuses — where the employment contract specifies a minimum bonus payment — are generally treated most favourably by lenders, as they represent a contractual obligation rather than a discretionary award. If your contract contains a guaranteed bonus clause, this should be evidenced and presented prominently in a mortgage application, as it can be counted in full by most specialist lenders who accept bonus income at all.
Discretionary bonuses — which are the most common structure in investment banking, asset management, and corporate finance — require a track record to evidence. Lenders will typically want to see two or three years of payslips and P60s demonstrating consistent bonus payment. The longer and more consistent the track record, the more credibly a specialist lender can include it. A banker who has received bonuses for seven consecutive years is in a very different position from one who has only had one year of bonus history.
Deferred bonuses — where part of the award is held back and paid in tranches over subsequent years, often in shares or restricted stock units — add further complexity. Some lenders will not count deferred compensation at all, while specialist lenders and private banks will work through the vesting schedule and consider deferred amounts as part of total remuneration. For senior bankers where deferred compensation makes up a substantial portion of total package, finding a lender who understands these structures is essential.
