A client tells you they earn €80,000. The lender comes back with a figure that looks like it was calculated for someone on €65,000. Nobody lied and nothing went wrong — the client's pay is simply not all the same kind of money, and lenders have spent decades building rules to say so. Bonus, commission and overtime are assessed differently from base salary, differently from each other, and differently between lenders. For mortgage advisors this is daily work. For estate agents it is the single most common reason a buyer's stated income and their actual buying power diverge, which makes it worth understanding before you take a property off the market. This guide covers how variable pay is treated, what evidence lenders want, a worked example of the arithmetic, and how to advise a client whose earnings are mostly performance-based.
Every affordability assessment starts by sorting a client's earnings into two buckets. Guaranteed income is contractual and survives a bad year: base salary, a fixed car allowance, a contractual shift premium. Variable income is anything that depends on performance, hours worked or an employer's discretion — bonus, commission, overtime, tips, on-call payments, profit share.
The distinction exists because a mortgage lasts decades and a bonus lasts one year. A lender is not asking "what did this person earn last year?" It is asking "what will this person reliably earn for the next twenty-five?" Base salary answers that question directly. Variable pay answers it only probabilistically, so the lender applies a discount that reflects how likely the payment is to repeat. The same logic that governs self-employed mortgage assessments applies here: income that can fall to zero without anyone breaching a contract gets counted cautiously.
The three levers lenders pull
Almost every lender's rulebook is some combination of three mechanisms. Knowing which one is biting explains most surprising outcomes.
Averaging. The lender takes a mean of the last two (or sometimes three) years of variable pay rather than the most recent year. A client whose commission jumped from €10,000 to €30,000 is assessed on €20,000, not €30,000.
Lower-of. More conservative lenders take the lower of the last two years instead of the average — which means one weak year drags the figure down until it rolls out of the window.
The haircut. A percentage applied to whatever survives the first two steps. Regular monthly commission might be taken at 100% by one lender and 50% by another; a discretionary annual bonus is more often in the 50–60% range. This is the lever with the widest spread between lenders, and the reason broker placement matters so much for these clients.
These stack. A client can be averaged, then have the average lower-of'd against a weak prior year, then have the survivor cut in half. Three reasonable-sounding rules compound into a figure that feels arbitrary to the client unless somebody explains the sequence.
Why commission usually beats bonus
Not all variable pay is equally variable. Commission paid every month, on every payslip, over two years, starts to look structurally like salary even though it is technically performance-based — and lenders reward that pattern. A single discretionary bonus paid each March is the opposite: it can be reduced to zero by a decision the employee has no part in, with no contractual consequence. Overtime falls in between, and the deciding question is almost always whether it is contractual and guaranteed or genuinely ad hoc. An employer reference that says "guaranteed minimum overtime under contract" is worth real money on the assessment.
A worked example: what €80,000 is actually worth
Take an illustrative buyer with a €55,000 base salary and variable pay of €30,000 last year and €20,000 the year before — a €85,000 total package on the most recent year. Two lenders assess it:
Lender A averages the two years (€25,000) and takes 100% of regular commission. Assessed income: €55,000 + €25,000 = €80,000.
Lender B takes the lower of the two years (€20,000) and applies a 50% haircut because it classes the pay as discretionary. Assessed income: €55,000 + €10,000 = €65,000.
At an illustrative income multiple of 4.5×, that is €360,000 from Lender A and €292,500 from Lender B — a €67,500 difference in buying power on identical payslips. Add a €50,000 deposit and the same buyer is shopping at €410,000 or at €342,500 depending purely on which lender's rulebook they land in. (Figures are illustrative and rounded to show the mechanics; multiples, haircuts and criteria vary by lender and market.)
This is why "how much can I borrow?" is an unanswerable question for a client with variable pay until a specific lender is named. It is also why a client who shops on price comparison alone can leave a six-figure chunk of buying power on the table. The same stress-testing that produces these numbers is covered in more depth in our guide to mortgage affordability.
What the file actually needs
Variable-income cases fail at document stage more often than at decision stage. The usual pack is three months of payslips, matching bank statements, two years of year-end tax summaries, and — the one that gets forgotten — an employer reference clarifying the nature of the variable element.
The classic trap is the payslip window. If commission is paid quarterly and the last three payslips happen to miss a payment month, the file appears to show a client with no commission at all. Underwriters do not always ask; they sometimes just assess what is in front of them. For any client whose variable pay is not monthly, work out which months carry the payments and supply those payslips explicitly, with a covering note. It takes five minutes and prevents a fortnight of back-and-forth.
Existing commitments cut the other way and are worth surfacing early — car finance, credit lines and buy-now-pay-later balances all reduce the assessed figure through the debt-to-income calculation described in our guide to debt-to-income ratios. A client with strong variable income and heavy commitments can end up below one with a modest salary and none.
How agents should read a variable-income buyer
For an agent, the practical implication is narrow but important: the number a buyer quotes at a viewing is usually their package, and the number that buys the house is the lender's assessed figure. Those can be €50,000 apart. Three habits fix it:
Ask for the lender's figure, not the salary. A mortgage in principle states an amount; a job title does not.
Check the date harder than usual. Variable-income assessments move as the two-year window rolls forward, and a renewal can land lower than the original.
Expect more valuation sensitivity. Buyers stretching to the top of a variable-income assessment have less cash headroom if the valuation lands under the agreed price.
That last point is where the mortgage conversation becomes a pricing conversation. If the agreed price is not evidenced by comparable sales, the lender's valuer will eventually say so — and a buyer whose borrowing was already discounted has the least room to bridge the gap in cash. This is the check Biedradar is built to make cheap: enter an address and it returns comparable sales, a valuation range and market signals, then produces a branded property analysis report you can put in front of a client in minutes.
Advising a client whose income is mostly variable
The honest framing for a client is that their pay structure has not made them a worse borrower — it has made them a harder one to place, which is a different problem with a different solution. Practical advice worth giving:
Timing matters. Applying two months after a strong bonus year rolls into the two-year window can be worth more than anything else the client does.
Do not gather multiple decisions in principle. Compare lender criteria on paper first; running several credit searches can itself tighten the outcome.
Clear small commitments before applying, not after. A modest balance can cost more borrowing capacity than it costs to repay.
Budget on the assessed figure, not the package. Clients who mentally spend their bonus twice are the ones who stretch to a price the valuation will not support.
Advisors who explain the sequence — sort, average, haircut, stress-test — rather than just delivering the final number get far fewer arguments and far fewer withdrawn applications. The figure stops looking like a judgement about the client and starts looking like what it is: a rule about how reliably money repeats.
Frequently asked questions
Do lenders count bonus and commission towards a mortgage?
Most do, but rarely at face value. A typical lender takes an average of the last two years of variable pay, or the lower of the last two years, and then applies a percentage — commonly somewhere between 50% and 100% depending on the lender, the income type and how regular it is. Overtime and commission that recur monthly are usually treated more generously than an annual discretionary bonus. The result is that a client earning a €60,000 base with €20,000 of variable pay is almost never assessed on €80,000.
How many years of bonus or commission do lenders need to see?
Two years is the common baseline, evidenced by payslips and an employer reference or P60-equivalent year-end summary. Some lenders accept one full year if the payments are contractual rather than discretionary, and a few will consider less for regulated professions with structured pay. Fewer than two years usually means the income is either discounted heavily or ignored entirely, which is why timing an application around a bonus anniversary can materially change the figure.
Why is my mortgage offer lower than my total earnings?
Because lenders separate guaranteed income from variable income and treat them differently. Base salary is contractual and continues if performance drops; bonus, commission and overtime are not guaranteed, so the lender assumes some of it will not recur. It then stress-tests the resulting payment at a rate above the one you are actually paying. The gap between total earnings and the assessed figure is the lender pricing in the risk that the variable part disappears.
Is commission treated differently from a bonus?
Usually, yes. Regular monthly or quarterly commission that appears consistently on payslips looks more like income and is often accepted at a higher percentage. A single discretionary annual bonus is the least reliable form of variable pay in a lender's eyes, because it can be cut to zero without any change to the employment contract. Overtime sits between the two and depends heavily on whether it is contractual, guaranteed or purely ad hoc.
What documents evidence variable income?
Typically the last three months of payslips plus the corresponding bank statements, the last two year-end summaries or tax documents, and often an employer reference confirming whether the variable element is contractual, guaranteed or discretionary and whether it is expected to continue. Where commission is paid quarterly or annually, lenders will want payslips covering those payment months specifically, not just the three most recent ones.
How should an agent qualify a buyer with variable income?
Ask what the assessed figure on the lender's decision is, not what the buyer earns. Those are different numbers and only the first one buys a house. If a buyer quotes total package rather than a lender-confirmed amount, treat the offer as unverified and ask for a mortgage in principle showing the amount. Buyers with heavily variable pay are also the most likely to see a renewal come back lower, so the age of the document matters more than usual.
