Mortgages and Income Types

When it comes to getting a mortgage, lenders are mainly asking one thing: can you afford it? And they usually find the answer to this question by looking at your income. 

But some income streams are a bit more complicated to explain than others and if you can't clearly show enough evidence to support your mortgage application then lenders might see it as too inconsistent or unsustainable.

In this guide, you’ll find the types of income mortgage lenders accept, how they check it, and the kind of proof you’ll need to have ready. Once you know what you need, you'll be able to prepare in advance and keep your mortgage journey running smoothly.

Salaried Income

If you’re a PAYE employee, your income is usually the most straightforward for lenders to assess. It’s regular, predictable, and backed up by payslips.

What Proof Do You Need?

• Last 3 months’ payslips

• P60 (end-of-year tax summary)

• Bank statements showing salary credits

How Do Lenders Assess It?

As a starting point, most lenders will take your basic annual salary and multiply it by 4 to 5 times (depending on the lender) to estimate how much you can borrow, before conducting a more thorough affordability assessment. Bonuses, overtime and commission may be considered separately (see below).

Self-Employed Income

Getting a mortgage when you're self-employed can be a bit more complex than for salaried employees, as there are no payslips to confirm how much you earn, but it’s perfectly achievable with the right paperwork.

What Proof Do You Need?

• 2–3 years certified accounts

• SA302 tax calculations and HMRC tax year overviews

• Business bank statements

How Do Lenders Assess It?

Lenders usually look at your average income over the past 2–3 years. Some may use just the latest year if it's higher. The key is showing consistency and stability.

If you work on a freelance or contractor basis, the affordability assessment will depend on how you operate.  If you have a long-term contract, lenders may use the day or hourly rate to calculate an annualised income (e.g. daily rate x 5 days x 46 weeks). Otherwise, they’ll often average your income over 2-3 years in the same way as other self-employed applicants. 

Dividend Income / Retained Profits

If you're a director of a company and your remuneration mainly consists of dividends with a relatively small salary, you'll need to provide a full picture of your earnings so you're not limited on the amount of mortgage you can get.

If you tend to retain the majority of the profits in the business rather than withdrawing them, certain specialist lenders could consider this figure as an alternative.

What Proof Do You Need?

SA302 tax calculations and HMRC tax year overviews

• The last 2-3 years company accounts

• Dividend vouchers

• Company bank statements

• Accountant’s reference (for retained profits)

How Do Lenders Assess It?

Most lenders will only take your salary plus dividends into account when deciding how much you can borrow for a mortgage. But there are some specialist lenders who'll consider retained profits alongside (or typically instead of) your salary and dividends.

This could be especially helpful if you keep a large amount of capital in the business for tax-efficient reasons and are looking to borrow a higher amount.

Supplementary Income

If you have the potential to earn more than your basic salary, either through regular bonuses, overtime, or commission, this could also be taken into account when working out how much you can borrow, although not all lenders will include 100% of it. 

What Proof Do You Need?

• Payslips showing the breakdown of your earnings

• P60 showing total annual income

• Last 3 months bank statements

How Do Lenders Assess It?

Some lenders will consider up to 100% of your bonus or overtime earnings if it’s regular. Others may only include 50%, or average it over the last 1-2 years. The more consistent your supplementary income is, the better your chances of being able to borrow more for your mortgage. 

Pension Income

If you're retired or receiving regular pension payments, lenders can accept this as valid income, whether from the state, private schemes, or annuities.

What Proof Do You Need?

• Pension award letters

• P60 (if applicable)

• Bank statements showing pension payments

How Do Lenders Assess It?

Pension income is typically treated like a salary, particularly if it’s drawn from a defined benefit scheme or State pension, and the amount is guaranteed during your lifetime. Some lenders will also consider future pension income if you're approaching retirement age when you apply. 

Rental Income

If you’re a landlord, additional income from your buy-to-let properties can boost your overall affordability and help achieve a higher mortgage amount. 

What Proof Do You Need?

• SA302 tax calculations and HMRC tax year overviews showing the rental income amount (usually for at least the last two years)

• Tenancy agreements

• Mortgage statements for any rental properties

How Do Lenders Assess It?

Lenders will often take the net rental income (after expenses and mortgage repayments) or a percentage of the gross rent, usually around 60%-75%. Some specialist lenders are more flexible and can consider up to 100% of your rental income. 

Investment Income

Money from dividends, stocks, or other investments can be counted, but only if it’s consistent and well-documented.

What Proof Do You Need?

• SA302 tax calculations and HMRC tax year overviews showing the investment income amount

• Annual investment statements

• Evidence of ongoing income

How Do Lenders Assess It?

Income from investments is treated more cautiously. Lenders want to see a reliable track record, and they may discount variable returns. You’ll usually need to show at least two years of consistent income for it to be included in your affordability assessment.

State Benefits

You might not think of benefits as mortgage income, but many lenders will accept them, especially when used alongside other income.

What Proof Do You Need?

• Award letters or statements

• Bank statements showing payments received

How Do Lenders Assess It?

Each benefit is treated differently. Child benefit, Universal Credit, Personal Independence Payments (PIP), and Carer’s Allowance may be accepted in full or in part. It depends on the lender’s policy, but it’s definitely worth disclosing the type of benefits you receive on your application.

What Income Do Lenders Accept for a Mortgage?

Here’s a quick reference table to sum everything up.