Remortgage With Commission Income

How Commission Income Works for Mortgage Purposes

Commission income falls into the broader category of variable earnings that lenders assess alongside your basic salary. However, commission has its own specific characteristics that lenders take into account when evaluating your remortgage application.

From a lender's perspective, commission income is categorised broadly into two types:

Commission on top of a basic salary. This is the most common arrangement, where you receive a guaranteed base salary supplemented by commission payments based on your sales or performance. Lenders are generally comfortable with this structure because there is a guaranteed income floor, with the commission providing an uplift.

Fully commission-based or self-employed commission. If your income is entirely or predominantly commission-based, with little or no guaranteed salary, lenders will treat this more cautiously. Some may assess you similarly to a self-employed applicant, requiring more extensive documentation such as tax returns and accounts.

The way lenders calculate commission typically involves averaging your commission earnings over a period of time. Most will look at the last 12 months of commission payments, though some may examine six months or up to three years. The average figure is then used as the commission element of your income for affordability purposes.

As with other types of variable income, lenders do not always count 100 per cent of your average commission. Many apply a discount of between 25 and 50 per cent, while some more favourable lenders will accept the full average amount. This discount reflects the lender's assessment of the risk that future commission may be lower than the historical average.

Some lenders also consider the trend in your commission earnings. If your commission has been growing steadily over two or three years, some lenders may give more weight to your most recent earnings. Conversely, if commission has been declining, lenders may use a lower figure than the average to account for the downward trend.

The specific industry you work in can also influence how lenders view your commission. Industries with established commission cultures, such as estate agency, recruitment and financial services, are well understood by most lenders. More niche or unusual commission structures may require additional explanation.

Documentation You Need for Commission Income

Thorough documentation is particularly important when your income includes a commission element. Lenders need to verify not only the amounts you have earned but also that the commission structure is ongoing and sustainable.

The essential documents you should prepare include:

• Payslips - At least six months, ideally twelve, showing your basic salary and commission as separate line items. Commission should be clearly identifiable and not bundled with other payments such as expenses or allowances
• P60s - Your annual tax summaries for the last two to three years. These confirm your total annual earnings and allow the lender to see the overall contribution of commission to your income
• Employment contract - Detailing your basic salary, commission structure, targets and payment frequency. This helps the lender understand how your commission is calculated and what drives it
• Commission schedule or plan - If your employer has a formal commission plan document, this provides detailed information about the structure, rates and any caps or accelerators that apply
• Employer letter - Confirming your role, commission structure, average commission earnings and the expected continuation of the scheme. This is particularly valuable for reassuring lenders about the ongoing nature of your commission income

If your commission fluctuates significantly from month to month, providing a breakdown of monthly commission over the last one to two years can be helpful. This allows the lender to see the full range of your earnings and calculate a meaningful average.

For borrowers who are paid commission quarterly or annually rather than monthly, the standard three-month payslip request may not capture any commission payments. In these cases, providing payslips covering at least one full commission payment cycle, along with P60s, gives the lender the information they need.

It is also wise to keep records of any commission statements or reports you receive from your employer. These internal documents may not be required by the lender, but they can be useful for clarifying any questions that arise during the underwriting process.

Strategies to Maximise Commission Income for Remortgaging

Commission earners can take several proactive steps to ensure their income is fully recognised and maximised in the remortgage application process.

Build a strong track record. The longer you have been earning commission consistently, the more weight it carries with lenders. If you have recently moved into a commission-based role, consider waiting until you have at least 12 months of commission history before applying. Two years is even better for lenders who want a more established pattern.

Keep detailed records of your commission. Maintain a personal record of your monthly commission earnings alongside your payslips. This makes it easy to demonstrate your earning pattern and quickly calculate averages when needed. If there are months where commission was unusually low or high, noting the reasons can help you explain any anomalies to the lender.

Choose the right lender. Some lenders are far more generous than others in how they treat commission income. A few will count 100 per cent of your average commission with no cap, while others may only count 50 per cent or cap the commission element relative to your basic salary. A whole-of-market broker can match you with the lender that gives you the best result.

Present your commission structure clearly. If your commission scheme is complex, with multiple tiers, accelerators or different rates for different products, consider preparing a brief summary that explains how it works. This can save time during the underwriting process and prevent misunderstandings that could result in your commission being undervalued.

Time your application strategically. If your commission tends to be higher at certain times of year, applying when your recent payslips show strong commission earnings can be advantageous. While lenders look at averages, having strong recent figures sets a positive impression and may benefit you with lenders who weight recent earnings more heavily.

Reduce your debt-to-income ratio. Clearing credit card balances, personal loans and other commitments before applying frees up more of your income for mortgage affordability. For commission earners, this is particularly important because only a portion of your commission may be counted, making every pound of uncommitted income more valuable.

Commission Income Challenges and How to Overcome Them

While many commission earners successfully remortgage, there are specific challenges that can arise. Being aware of these and knowing how to address them will help you navigate the process more smoothly.

Inconsistent commission levels. If your commission has varied significantly from month to month or year to year, lenders may take a conservative approach. The best way to address this is to provide the longest possible track record and to choose a lender that uses a methodology favourable to your specific earnings pattern. For instance, some lenders will use the higher of your average or most recent year if your income is trending upwards.

New to a commission role. If you have recently started a commission-based job, you may not yet have enough history for lenders to assess your commission income. In this case, you may initially need to rely on your basic salary only. Once you have six to twelve months of commission history, you can consider remortgaging again to take advantage of your full earning potential.

High commission relative to basic salary. When commission makes up a very large proportion of your total income, perhaps 50 per cent or more, some lenders become more cautious. They may cap the commission element or apply a steeper discount. However, other lenders specialise in commission-heavy roles and have criteria designed for this exact situation.

Commission from multiple products or clients. If your commission comes from selling different products with different rates, or from multiple clients, the structure can appear complex. Providing a clear breakdown of how your commission is calculated and from what sources helps the lender assess it accurately.

Commission with clawback provisions. Some commission schemes include clawback clauses where commission can be reclaimed if a customer cancels or a deal falls through. Lenders are aware of this risk and may factor it into their assessment. If your clawback rate is low and you have records to demonstrate this, sharing this information can help.

Industry-specific concerns. Certain industries are perceived as more volatile or cyclical, which can affect how lenders view commission income from those sectors. If your industry has recently experienced challenges, be prepared to explain why your personal commission has remained stable or is expected to recover.

Commission-Only Earners and Remortgaging

If you are paid entirely or predominantly on commission with no significant basic salary, the remortgage process requires a slightly different approach. Commission-only earners often face more scrutiny, but there are lenders who understand and accommodate this income structure.

Some lenders will assess commission-only earners similarly to self-employed applicants, particularly if you are self-employed or work on a contract basis. In these cases, you may need to provide SA302 tax calculations, tax year overviews and certified accounts rather than payslips. The assessment will typically be based on your net income after expenses over two to three years.

If you are employed but paid entirely on commission, lenders will still use payslips and P60s as the primary evidence. However, because there is no base salary to provide a guaranteed income floor, they will examine your commission history more carefully and may require a longer track record, typically at least two years.

The key challenge for commission-only earners is demonstrating income sustainability. Lenders want to be confident that you can maintain your mortgage payments even during quieter periods. Having savings that could cover several months of payments provides additional reassurance, as does a long history of consistent earnings.

Some specialist lenders have developed products specifically for commission-only earners. These lenders understand the dynamics of commission-based income and have underwriting processes designed to assess it fairly. They may accept a higher proportion of your commission and be more flexible about how they calculate your sustainable income.

Working with a specialist mortgage broker is particularly important for commission-only earners. A broker with experience in this area will know which lenders are most accommodating, how to present your income effectively, and what documentation will give you the best chance of approval at the most competitive rate.

It is also worth considering whether your income structure can be reclassified or restructured. Some employers are willing to adjust the balance between basic salary and commission, which can make the mortgage application process more straightforward. Even a small guaranteed element can significantly widen your lender options.

Choosing the Right Mortgage Product With Commission Income

When your income includes a significant commission element, the type of mortgage product you choose should reflect the variable nature of your earnings and provide the flexibility you need to manage your payments effectively.

A fixed rate mortgage is often a popular choice for commission earners because it provides certainty about monthly payments. When your income varies, knowing exactly what your mortgage will cost each month helps with budgeting and ensures you can always plan ahead, even during quieter commission periods.

However, consider a product with generous overpayment facilities. Most mortgages allow overpayments of up to 10 per cent of the balance each year without penalty. During months when your commission is strong, making overpayments can reduce your balance faster and build a buffer that provides security during leaner months.

An offset mortgage can be particularly effective for commission earners. By linking savings to your mortgage, you reduce the interest charged while keeping your savings accessible. During high commission months, you can build up your offset account, and if commission drops you can access those savings if needed. This flexibility can be invaluable for managing variable income.

Some lenders offer flexible mortgages that allow you to vary your monthly payments within certain limits. This can be ideal for commission earners who want to pay more during strong months and less during quieter periods, as long as the overall repayment schedule is maintained.

When comparing products, pay attention to early repayment charges. If your circumstances change and you need to remortgage again, high early repayment charges could be costly. Shorter fixed terms of two or three years give you more frequent opportunities to reassess your position without penalty.

Finally, consider the total cost of the mortgage over the deal period, including arrangement fees, valuation fees and legal costs. A product with a slightly higher rate but no fees can sometimes work out cheaper overall, particularly if you are borrowing a smaller amount. Your broker can run a total cost comparison across different products to help you make the most informed decision.