Proving that you have a stable job and income is vital for getting approved for a mortgage.
Lenders verify income by asking for payslips if you work as a pay-as-you-earn (PAYE) employee. Payslips prove how much you earn and help assess how much you can borrow.
But how many payslips do you need for a mortgage in the UK? Read on to find out.
How Many Payslips Are Required for a Mortgage?
Mortgage providers usually require you to provide at least three of your most recent payslips if paid monthly. The number of payslips you must provide will vary based on various factors. These include:
Frequency of Payments
Lenders can ask for a different number of payslips depending on how often you get paid.
The payment frequency will help determine the consistency of your income, with most lenders preferring to work with borrowers with regular income instead of unpredictable earnings.
The table below shows the number of payslips you may need for a mortgage depending on the frequency of payments:
|
Payment Frequency |
Number of Payslips Needed |
|
Every week |
8 payslips |
|
Every two weeks |
6 payslips |
|
Every month |
3 payslips |
|
Every quarter |
3 payslips |
|
Every half-year |
4 payslips |
|
Every year |
2 payslips |
Extra Income
If you get extra income like a bonus, overtime, or commission, lenders will need you to show more payslips.
Providers may consider the additional income as part of their earnings depending on their criteria and the type of income.
You must show the lender that the extra income is regular so they can count it as part of your earnings.
The Lender’s Policy
Lenders can have varying requirements and criteria for mortgage approval. Some can feature strict guidelines for proving income, while others can be more flexible.
Factors like your credit score or deposit size can also impact how many payslips you must show. You may face less scrutiny if you have a sizeable deposit or a strong credit history.
What Information Should Your Payslips Include?
Most lenders require your payslips to have essential information like:
- A clearly shown pay date and tax period
- Employee name that matches the name in the mortgage application
- Your net pay
- Your gross pay in the form of basic salary, notional salary, or contractual pay
- Additional allowances, including shift, location, or car allowances
- Any overtime, bonus, or commission if included
- An address matching the address on your application
- The employers name
- The outgoings included in your application, such as childcare or student loan payments
Why Do Lenders Ask for Payslips?
To Confirm Your Employment and Profession
The payslips prove to the lender that you’re permanently employed and have a stable income to afford mortgage repayments comfortably.
Your employment type can affect how much you can borrow. High street lenders like banks prefer working with employed applicants as they’re considered lower risk.
They also favour applicants in low-risk careers, including those with a structured career path, such as doctors, police, teachers, and solicitors. Borrowers in such careers can easily qualify for higher income multiples.
To Comply with Lending Regulations
The Financial Conduct Authority (FCA) requires mortgage providers to assess whether you can afford repayments for the loan you wish to take out before approval.
Lenders must take reasonable steps to ensure you don’t get into unmanageable debt, including asking for your payslips to confirm your earnings.
They undertake a mortgage affordability assessment by considering your income, debts, and how much you spend.
Related reading:
- Reasons for remortgaging.
- Remortgaging to release equity.
- Remortgaging to buy another property.
- Remortgaging with bad credit.
- Remortgaging for home improvements.
- I own my house outright can I remortgage?
- Capital raising mortgages.
To Determine Your Borrowing Capacity
Payslips also help lenders confirm how much you earn to determine how much you can borrow.
Most lenders assess your borrowing capacity using income multiples and are willing to offer 4 to 4.5 or 5 times your annual income.
For example, if your income is £40,000, you’ll likely be able to borrow £160,000-200,000.
If your payslips show consistent overtime, bonus, and commission payments, some lenders can include them as part of your overall income, increasing your borrowing capacity.
To Calculate Your Debt-to-Income Ratio
The payslips also allow lenders to calculate your debt-to-income ratio when assessing your affordability.
The ratio shows the proportion of your income spent on paying off existing debts, including personal loans, credit card debt, or car finance.
For example, if you have a monthly income of £2,000 and spend £500 paying off debts, your debt-to-income ratio is ((500/2,000) x 100), or 25%.
The lender will reduce the amount they’re willing to offer if you have a large debt, such as 50% of your monthly income.
Most lenders prefer a debt-to-income ratio below 20% since it shows you’re a low-risk borrower who manages debts well.
Can You Qualify for a Mortgage without Payslips?
Yes! If you’re self-employed or a contractor, you can use other documents instead of payslips to prove your income. Lenders will want evidence of your recent, current, and potential future earnings.
Documents you can use include:
Tax Returns
Most lenders will require you to provide at least two to three years of your SA302 tax overview or HM Revenue and Customs (HMRC) documents.
They’ll calculate your earnings over two or three years of accounts, with some considering one year of accounts or less.
If you do your Self-assessment tax return, you can print your tax year overview or tax calculation using commercial software or the HMRC’s online services.
Bank Statements
Lenders will want to see your bank statements for 3 to 6 months to assess your finances and income.
Bank statements can help lenders verify your income, clarify affordability, check for additional risk factors, and see your deposit funds.
Things that lenders look at in your bank statements include how much you earn, the outgoings, deposit source, and issues like excessive gambling or possible fraud.
You can optimise your bank statements before applying by avoiding unnecessary overdraft facilities, avoiding non-essential purchases, and ensuring your income or earnings go into the same account.
Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.
Final Thoughts
Most lenders require at least three of your most recent payslips to qualify for a mortgage if you’re paid monthly.
However, the payslips needed can vary depending on how often you’re paid, the lender’s policy, and whether you receive any extra income.
