Bank’s comprehensive mortgage approving view on different types of incomes (e.g., commissions, bonuses, part-time income, allowances, etc.)
Given the current uncertain economic situation, the most crucial factor before purchasing a property is to calculate whether your income is sufficient for applying for mortgages. It is easier for banks to approve your mortgage application if your salary is stable. However, there are also many different kinds of incomes, such as commissions, bonuses, part-time jobs, allowances, etc. What are the banks’ point of view on these types of incomes? The answer will be answered below.
First, let’s talk about a stable income. Basic salary is sufficient proof when applying for a mortgage; if the employment contract states that the employee has double pay at the end of the year, it will also be regarded to increase repayment ability. Generally, when you are paid, MPF contributions will be deducted from your salary. However, when applying for a mortgage, the salary before the MPF deduction is calculated as your repayment ability.
For people with an unstable income, banks may not take full income into account when applying for mortgages. In particular, if you are looking for a 90% mortgage, you must have a stable income. Therefore, people with unstable income can only apply for an 80% mortgage.
Commissions are the most common floating income. Banks have traditionally used data from the past six months to calculate the average monthly income. However, some banks have recently tightened their standards to use the average of the past year, even the average of the past three and six months. In comparison, the lower one is used to reflect the impact of the economy on income.
Regular bonus can be included in the calculation
Some banks value the “stability” of commissions. For example, commissions in the past six months have been good, but they only had one month of business. Some banks may not necessarily regard them as “income.”
If you are using the commission as your main income, you must first understand the income calculation methods of different banks before applying for mortgages, and then choose the most suitable bank for approval.
Bonuses usually vary, but as long as the payslip and employment contract shows that the company regularly pays bonuses, this bonus income will be calculated when applying for a 90% mortgage; the calculation method is the average monthly salary of the past two years. For overtime allowance, other allowances, contract gratuity, etc. are counted as unstable income. They are generally calculated based on the average of the past six months.
However, if the employment contract states that the rental allowance must be used to rent the property, and it may not be calculated as income when applying for a mortgage.
Civil servants have different allowances and benefits, most of which can be counted as income, except Acting Allowance.
This key advantage of civil servants is that as long as the treasury approves these allowances and the allowances will be fully counted in your repayment ability.
For employees in the aviation industry, such as flight attendants or captains, if travel allowances are credited to a credit card, then they may not be counted as repayment ability.
Insurance practitioners often have remuneration for contractual maturity, which is not regarded as income by ordinary banks. However, there are individual banks that remuneration can be counted as income as well.
For part-time income, if you are a self-employed person and hold a qualification certificate, such as a taxi certificate, the relevant income can be calculated as income. Still, at most, you can only apply for an 80% mortgage.
If the part-time job is not professional, such as running an online store, when applying for a mortgage above 60%, the repayment ability is calculated the same as a self-employed person. Thus you need to provide an audit report and profit tax letter.
If a “fixed part-time job” declares tax information, relevant income can be calculated as repayment ability when applying for a mortgage. People often ask, “Can my part-time job income also count in my repayment ability?”
As long as the long-term employment contract states that part-time work is permitted, Max. An 80% mortgage can be applied. However, civil servants are not allowed to have a part-time job, even if they do, their part-time income will not be counted as an extra income.
When applying for a normal mortgage (60% of property valuation or below), the income from rent can be calculated as income, but only 70% of total rental income can be taken into account.
If the rented property is still under mortgage loan terms, HKMC needs the relevant property loan letter to indicate that it is for rental purposes. As for mortgages of 60% or below, many banks have flexibly dealt with the rental income of outstanding mortgage repayments.
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