All Topics / Finance / Borrowing Capacity: Small Base Salary with Large Bonus vs Bigger Base Salary

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  • Profile photo of magic32magic32
    Participant
    @magic32
    Join Date: 2005
    Post Count: 49
    May 21, 2014 - 4:22 pm

    Hi,

    I’m looking for a new job, and then will buy my first property – for investment.
    If the job has a base salary of $40,000 p.a. with commission/bonus which can result in an annual income which can be as high as $150,000 p.a.. Is that better than a job that is $50,000 p.a. with no commission/bonus. Which one has more borrowing capacity? i.e. do lenders look at the base salary more (is certain) or the total annual income (is not certain).

    If the job has commission/bonus how long do I need to wait before applying for pre-approval, e.g. do I need to wait one year until I get the tax return or can it be quicker than that if the commission is shown on my payslip perhaps.

    Thanks

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    May 21, 2014 - 7:44 pm

    Hiya

    Lenders will usually want to see some consistency with the commission/bonus payments over time – the timeframe varies between banks and it’s not uncommon for them to want to see two years worth of consistent income.

    So a higher base salary might be better in the short run – and a base + commission/bonus better in the long run (providing your income is consistent).

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    May 21, 2014 - 11:22 pm

    Hi Magic

    As Jamie mentioned both commission and bonuses can be considered in assessing serviceability however realistically you probably need 12 months track record.

    Many lenders will want to see it over a longer period but there are the odd or two who will be satisfied with a single Tax Return.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010
    May 22, 2014 - 12:03 am

    Lenders look at base income as the most reliable form, with bonuses, overtime etc being treated differently by various lenders. Bonuses generally need to be shown over 12-24 months to be considered by most lenders as income.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

Viewing 4 posts - 1 through 4 (of 4 total)

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