When applying for a mortgage, lenders assess your income to determine how much you can borrow. But what types of income are accepted? While a full-time salary is the most common, other sources such as bonuses, benefits, and self-employed earnings may also count. In this guide, we’ll break down what income can be used for a mortgage in the UK and how to maximise your borrowing potential.
Why Income Matters in a Mortgage Application
Mortgage lenders assess income to determine affordability and loan size. They typically calculate your loan eligibility using:
Your gross annual income
A loan-to-income (LTI) ratio, usually between 4 to 4.5 times your salary
Your monthly outgoings and credit commitments
Understanding which income sources count can help you boost your mortgage approval chances and increase your borrowing limit.
Types of Income Lenders Accept
1. Salaried Income (PAYE Employment)
If you’re in full-time employment, lenders will consider:
Basic salary – Your guaranteed annual income before tax
Overtime – Often accepted if it is regular and provable
Bonuses and commissions – Some lenders count these, but may only include a percentage
Shift allowances – Usually considered if consistent
Proof Required: Payslips (last 3–6 months), P60, employer reference
2. Self-Employed Income
For self-employed applicants, lenders assess income differently. They typically consider:
Net profit (sole traders and partnerships)
Director’s salary + dividends (limited company owners)
Retained profits (some lenders accept)
Proof Required: SA302 tax returns (last 2–3 years), company accounts, bank statements
3. Freelance and Contractor Income
If you work as a freelancer or contractor, lenders may calculate an average income based on:
Day rate contracts – Some lenders multiply your day rate by a set number of working days (e.g., 46 weeks per year)
Annual earnings from invoices or accounts
Proof Required: Tax returns (SA302), contracts, invoices, business bank statements
4. Pension Income
If you’re retired, many lenders accept:
State pension
Private and workplace pensions
Investment income from annuities
Proof Required: Pension statements, P60, bank statements
5. Rental Income
For landlords, rental income is often considered, but policies vary. Some lenders:
Use a percentage of rental income (e.g., 50%–80%)
Require a history of rental income receipts
Ask for self-assessment tax returns
Proof Required: SA302 tax returns, tenancy agreements, bank statements
6. Benefits and Government Support
Certain benefits can be considered if they are long-term and reliable, such as:
Child Benefit (if applicable based on income level)
Disability Living Allowance (DLA) or Personal Independence Payment (PIP)
Universal Credit (only in specific cases)
Carer’s Allowance
Proof Required: Award letters, bank statements
7. Maintenance Payments and Court-Ordered Income
If you receive child maintenance or spousal support, some lenders count it as income. However, it must be consistent and court-ordered.
Proof Required: Court documents, Child Maintenance Service agreement, bank statements
What Income is Not Usually Accepted?
While lenders have different criteria, they often do not count the following:
Irregular bonuses or commission (if unpredictable)
One-off payments or inheritances
Casual or undeclared cash-in-hand work
Short-term benefits (e.g., Jobseeker’s Allowance)
Gambling winnings or unpredictable income sources
How to Maximise Your Borrowing Potential
If you want to increase the amount you can borrow, consider these strategies:
1. Improve Your Credit Score
A higher credit score makes lenders more confident in approving your application and may result in better interest rates.
2. Reduce Debt and Outgoings
Lenders assess your debt-to-income ratio (DTI). Paying off outstanding loans or credit cards can boost affordability.
3. Choose a Joint Mortgage
Applying with a partner or family member increases total household income, allowing for a larger loan amount.
4. Provide a Larger Deposit
A higher loan-to-value (LTV) ratio reduces risk for lenders, increasing approval chances.
5. Work with a Mortgage Broker
Brokers can match you with lenders who accept non-traditional income sources.
FAQs About Mortgage Income in the UK
1. Can I Get a Mortgage Without a Salary?
Yes, if you have other stable income sources, such as rental income, investments, or a pension.
2. How Much Can I Borrow for a Mortgage?
Most lenders offer 4 to 4.5 times your annual income, but some specialist lenders may go higher.
3. Do All Lenders Accept Bonus and Commission Income?
Not all lenders count bonuses, and some only consider a percentage of commission-based earnings.
4. Can I Use Benefit Income for a Mortgage?
Some benefits count towards affordability, but lender policies vary, so check before applying.
5. How Do Lenders Verify Self-Employed Income?
Lenders check self-employed earnings using SA302 tax returns, business accounts, and bank statements.
Final Thoughts
Understanding what income can be used for a mortgage application in the UK is crucial when preparing for homeownership. While salaried earnings are the most common, self-employed income, pensions, benefits, and rental income may also be considered by certain lenders.
To improve your mortgage eligibility, ensure your income is well-documented, consistent, and provable. If you have multiple income sources, working with a mortgage broker can help you find a lender who recognises your full financial picture and maximises your borrowing potential.
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