Providing Proof of Income for a Mortgage
Find out what documents you need to provide to prove your income and how a broker can help you
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In this article we explain how to prove your income for a mortgage application and the nuances that might come with being a contractor, a self-employed borrower or an applicant with supplemental income.
How to prove income for a mortgage
There’s various documentation lenders will accept as part of a mortgage application that proves how much you earn. For those who are employees, this is relatively straightforward but for those who are self-employed, have multiple income streams or are new to their current position, it may require submitting extra proof.
In terms of affordability, lenders will first look at a multiple of your gross income when assessing how much you can borrow. However, before approving your application they will also assess your outgoings versus your net income – or ‘take home’ pay – to confirm you have sufficient disposable income to cover the repayments.
If you’re unsure of what paperwork you should submit, a broker would be able to assess your situation and advise accordingly but as a starting point see the below.
Proof of income for an employee:
If you work as a PAYE employee, lenders verify income by asking for:
- Payslips: Most want to see the most recent 3 months’ payslips. If you have less or want to apply for a mortgage without any payslips, it’s still possible but talk to a broker about what else should be submitted instead.
In some cases, as well as payslips, a lender might require:
- P60s: Presenting the past 2 years’ P60 forms is a common requirement.
- Employment contract: If you are a contractor or can’t produce 3 months’ payslips perhaps because you’re in a new job, you could be asked for this.
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What else counts as income for a mortgage?
Outside of a salary, it’s not unusual for people to have other forms of income. Depending on what type of income it is and the lender’s own criteria, it may or may not be counted as part of your income. Even if it is, it could be that only a percentage of it is attributed to the final income amount. The below table outlines possible supplemental income and the proof that would be needed.
|Supplemental income type||% taken into account||Evidence needed|
|Bonuses||0-100%||Payslips or written confirmation of these supplemented by a bank statement showing the deposit|
|Commissions||0-100%||Payslips or written confirmation of these supplemented by a bank statement showing the deposit. If it makes up a large part of your income, a year or two’s P60’s may be required to prove it’s sustainable.|
|Overtime||0-100%||Payslips that show this is a regular occurrence supplemented by a bank statement showing the deposit. If it makes up a large part of your income, a year or two’s P60’s may be required to prove it’s sustainable.|
|Pension||Usually 100%||Annual pension statements, reward letters, P60s|
|Overseas income||0-100%||Translated payslips, accounts if self-employed and employer’s details.|
|State benefits||0-100%||Regular payments shown on bank statements and a full schedule of payment or reward letter from the relevant authority.|
|University bursary or grant||0-100%||A letter from the corresponding institution showing the breakdown of payments.|
|Child maintenance||0-100%||A court order/bank payments.|
|Rental income from another property||Usually 100%||SA302’s showing that the income is declared, tenancy agreements and bank statements.|
Can you include dividends for income purposes?
Yes, if you’re a company director of a limited company there are certain lenders who will include both your basic salary and any dividends paid for the purposes of calculating how much you can borrow.
Some lenders will ask for at least 2-3 years of certified accounts as evidence and expect a director’s share of their business to be in excess of 20%-25%.
A broker would be able to share which lenders would accept the various types of supplemental income and what their eligibility criteria would be.
How a mortgage broker can help with your proof of income
With expert knowledge on exactly what counts as proof of income for a mortgage in the UK, a broker will instantly make the application process a lot less stressful for you. They can:
- Provide bespoke advice based on your income, sharing what evidence can be used to qualify for a mortgage in your situation and how many months’ or years’ worth you’ll need to supply.
- Consult on whether any of your supplemental income could count towards your affordability assessment.
- Share which lenders are more lenient when it comes to proof of earnings for a mortgage and which might be best depending on whether you’re employed or self-employed.
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What to do if you don’t have enough proof of earnings
Perhaps you’ve only recently entered the workplace or switched to being self-employed and have no accounts as evidence to submit. If that’s the case, don’t panic. If you reach out to an expert, they’ll be able to advise on any lenders who don’t require as many months’ or years’ worth of payslips or accounts and advise on potential alternatives you could provide.
How to prove rental income for a buy-to-let property
If you plan on purchasing a home with the intention of renting it out and will use the rental income to cover the mortgage repayments, a lender will need to be comfortable that this will be sufficient. Most lenders require that the rental income be between 125% and 145% of the mortgage repayments. Lenders will arrange for a valuation of the property and the surveyor will advise what they believe the property would rent for on the open market.
Sidenote: In this scenario, it’s important to remember that some lenders require an applicant to be earning a minimum amount. This is often £25,000 a year.
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Get matched to a broker to help prove your income
Whether it’s your first time applying for a mortgage, you’ve got multiple income streams or want to apply for a mortgage without any proof of income, specialist expertise can really make a difference to your future as a homeowner. Our mortgage broker service can match you to a specialist who understands the intricacies of the various proof of income requirements and can work with you to navigate your specific application needs.
Call 0808 189 2301 or fill out an enquiry form to be matched to a mortgage broker for a free consultation today.
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In the past, this was possible via a self-certification mortgage but since the credit crunch these are a thing of the past. Some lenders offering buy-to-let mortgages have no minimum income requirements and you may not need to prove your income for a bridging loan if your plan is to sell the property at the end of the term. For a residential mortgage though, there will always need to be an income of some sort.
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