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If you have just had or are expecting a pay rise in the near future, you may be wondering if and when you can use this for your mortgage application. This guide explains all you need to know about getting a mortgage after a pay rise.
Getting a mortgage after salary increase
Mortgage lender criteria on pay rises vary from one lender to another. The time requirements also differ. For example, some lenders require you to have been receiving the new salary for at least one month and have one month’s payslip as evidence. Some may accept confirmation of the pay rise up to three months prior, if it is confirmed via contract or pay rise letter. Others may want a three-month history of having received the pay rise.
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Some lenders may accept the income via a contract or letter if the rise is not above a certain percentage (e.g., above 25%), or they may require a payslip showing the new salary as evidence.
How to evidence a pay rise to a mortgage lender
The evidence required varies among lenders, but usually includes one of the following:
- Payslips: The latest 1-3 months’ payslips evidencing the pay rise
- Bank Statements: Matching bank statements showing the salary credit.
- Updated Contract: An updated contract showing the new salary.
- Confirmation Letter: A pay rise confirmation letter.
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Bonuses & commission
While it’s possible with some lenders to accept forward-dated or recent pay rises for basic salaries, car allowances, and guaranteed income streams, it’s not usually possible to factor in bonuses or commission increases until there has been a track record of them, for example, 3 months of commission or 2 years of annual bonuses.
How to increase chances of success
Ensure you have the necessary documents, such as your contract, job offer letter, and latest payslips. If the pay rise has not yet taken effect, it must be guaranteed and not contingent on hitting KPIs or other conditions. While it’s possible to get a mortgage before the pay rise has taken effect with a job offer letter or contract, you will have more options once it has taken effect and you have at least one month’s payslip.
Using a mortgage broker can help you shop around and find lenders that are best suited for borrowers who have had or recently received a pay rise. Each lender’s criteria vary significantly.
Is it worth waiting until the pay rises before applying?
It depends on your circumstances. You may be able to afford the property you want without the pay rise, and you might not need to wait until it has taken effect. In some cases, you can use a job confirmation letter before the pay rise takes effect. While waiting for the pay rise might provide more options, it is possible to secure a mortgage without the rise.
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How can Strive help
At Strive, we are dedicated to assisting you throughout the mortgage application process, especially if you have recently received a pay rise. Our team is here to provide personalised guidance and answer any questions you may have. We understand that each lender has different criteria, and we can help you navigate these complexities to find the best options available.
Frequently asked Questions
It depends on the lender. Some may approve a mortgage up to 3 months in advance of the pay rise, while others may require 1-3 months of evidence after the pay rise.
Similar to a pay rise, this depends on the lender. Some may approve a mortgage up to 3 months in advance of the promotion, while others may require 1-3 months of evidence after the promotion.
This varies by lender. Some require 3 months of employment, while others may require 1-6 months. Continuous employment for 6 months is often needed, but not necessarily with the same employer. It’s worth using a mortgage broker to shop around.
Yes, subject to the lender’s criteria and evidence requirements.
You should inform the lender. It may not pose any issues if your salary remains the same or increases, but in some instances, you might need to provide additional payslips. The impact also depends on the contract type (permanent, fixed-term, zero hours, etc.).
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For more information on mortgages for contractors, please contact a member of the Strive team, by emailing [email protected] or call us on 01273 002697.
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