Case Study: How different banks assess unusual income

Marty McDonald - Tuesday, November 22, 2016

We recently had a client come to us who was seeking a home loan with the scenario that a good degree of his income was from annual bonuses. While a few lenders will not accept bonus income at all the most common policy is lenders require a two-year history at a minimum and then take 80% of the lower year’s figure. This is a prudent approach but in this case it was problematic as this client had only been with his current employer for a little over one year. He had been in the same industry for 20 years and he had always received bonuses like this in the past.

The solution was to find a lender that accepted 80% of his bonus income for the latest year which we did.

This got me thinking about the differences in the way lenders treat bonus income and how that effects overall borrowing capacity. Below is an example to illustrate the differences.

A single client on $100,000 base salary with no dependents or debts earned a bonus of $20,000 in 2015 and now at a new employer in the same industry earned a bonus of $60,000 in 2016.


Borrowing capacity for same client

Lender A:

Gross income = $148,000 pa

(Base + 80% of 2016 bonus income)


Lender B:

Gross income = $116,000

(Base + 80% of the lower of 2015 and 2016 bonus income amounts)


Lenders C & D:

Gross income = $100,000

(Base only. Either doesn’t take bonus income into account at all or needs 2 years with same employer to be eligible to consider)



These scenarios highlight how different lenders can seriously impact your borrowing capacity. For this reason, it’s important to work with an expert broker who knows the different lenders and their policies inside out. 

About the Author: Marty McDonald is principal of mortgage broker “Mortgage Experts”. Marty specialises in assisting active property investors with loan structuring advice and implementation as well as helping credit worthy borrowers with slightly outside the box income and employment situations. Find Marty on  and LinkedIn.
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