Can my bonus be included in income calculations for my mortgage?

A reader from London is trying to buy a property, but is not sure how banks will judge his bonus.

Drawing on years of experience, mortgage adviser Katie Tucker - technical manager at fee-free whole of market mortgage broker charcol.co.uk - takes him through the situation and what it means for his finances.

Mr Faris from London asks:

I am looking for a mortgage deal that will provide me 90 per cent of the property value (=£567,000), however, this amount is around 9.2 my annual salary (the best I could find online is 5x).

If I include my bonus in the calculation, the multiple will go down to 4.3, however this is based on last year's bonus, which obviously in not necessarily the same amount every year.

Am I wasting time looking for a mortgage deal given the amount of borrowing I am seeking vs my income level? How much could I borrow given my situation.

First thanks in advance for addressing my question, as well as the other question for which I had ready answered in your website.

Katie replies:

There are lenders able to consider a mortgage of 4.3x income that includes a bonus. Some firms use the last year's bonus but most use the average of the last few.

With a small deposit your choices are limited, however. I suggest you use a broker, as they are often able to negotiate your requirements outside of lenders' standard criteria, as long as there are other merits.

If you have a question for Katie, go to the myfinances.co.uk Ask the Mortgage Expert section.

For more information on the issues discussed here, go to mortgage broker charcol.co.uk or call 0800 358 5560.

Charcol Limited is authorised and regulated by the Financial Services Authority (FSA registration number 427339). The FSA does not regulate credit cards, personal loans or some investment mortgage contracts. Some buy-to-let mortgages are regulated by the Consumer Credit Act (CCA).