How to read your payslip for a mortgage

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Watch this video on my YouTube channel and read below for the full transcript…

Lots of us that are employed work for our companies and never really understand what our payslip means, but when it comes to your mortgage, you really do need to know what your salary is…

And it’s good to know in advance because then you’re not going to get any surprises later on. So what a mortgage broker and an underwriter look at is if you get your pay slip in front of you, there’s a top left-hand figure normally says basic salary, gross salary, something like that and what we’re going to be looking at is if you’re paid monthly, it will be multiplying that figure by 12 to give us your annual basic salary. Now, if the world was that simple, then that would be as much as we’ve needed to do, but lots of you get overtime or you might get different perks that show up on that left-hand side that also get taken into account.

Now, every single lender does something different, which is why you need a broker. I’m just going to put my camera up a bit, because for some reason it likes to just slowly move. So yeah, we’ll fix that. I need some better equipment. So yeah, a lot of you will get different things and a lot of lenders will take it into account differently. So for example, in the case of over time, a lot of lenders will take an average of your last three months over time to give them an annual figure. So that’s as simple as getting your last three months payslips, adding that over time together, dividing it by three and multiply that by 12. Now not every lender is the same. So a broker is going to be able to tell you, who’s going to give you the most based on your payslip, which is why Google is great, but it’s never going to give you that bespoke service that you need around you. So we will be looking at your payslip, how your income is broken down. And then from there, we’ll be able to see, well, which lenders are going to use that combination of income in the best way to give you the best affordability. If you’re looking to borrow the most you can get, which often people are.

There’s other benefits that typically show up on that left-hand column as well that we can take into account. So it’s worth basically you really get to grips with your payslip and understanding it. We will ask you. So if there is like PSG or something random on the left-hand side, we will need to know what it is. So it’s best for you to find out. And you can just Google the terms on your payslip and it will come up with a description. And then that might click as to what it relates to private health care benefits. Those sorts of things come up and show up in different ways that are a bit confusing or pension contributions. Now on your right-hand side is your tax, the lovely tax man and the insurance contribution. I wonder why we call him a man. It’s probably not very fair.

Is it that tax national insurance and then you’ll get any other deduction. So you might have a student loan and that will come off of your mortgage balance, typically your affordability. So we will need to know about that as well. But other things might come off there that you’ve got coming out of your payslip, and then you’re going to get your net figure, which is the bit that everybody knows about. So that’s how much you get paid in your bank. When we’re looking at your mortgage, though, we want to know the gross. We want to know what the overall figure is before we get to that net amount. And then we wanted to understand how it’s got there. So in short this all about that left-hand column, when it comes to, and we’ll get up allocation and it’s all about the net figure as well, when it looks at affordability, because we have to look at, by say an income multiple with affordability on your left.

And then we look at your actual affordability on a monthly basis taking into account your lifestyle, your bills, and what your bills are likely to be in your new property. The best advice I can give you in five minutes is to speak to a broker, speak to a broker. That’s going to look at your payslip in its entirety and explain to you how we have got our income and that way you’re going to get the best understanding. And it’s really important that you do understand your money. Because I need to understand is how can you improve it? Let me know any questions in the comments below. I will come back to every single one of you and answer them.