Overtime and Allowance Income
If a good part of your pay comes from overtime, shift penalties or a bonus, the number on your payslip and the number a lender uses can be a long way apart. How far apart depends almost entirely on which lender you ask.
Why lenders discount it at all
A lender is trying to work out what you will reliably earn over the next thirty years, not what you earned last fortnight. Base salary is contractual, so it is counted in full. Overtime is not: it can be cut when a roster changes or a project ends, so most lenders apply a discount, called shading, to allow for that.
Shading is usually expressed as a percentage of the overtime counted. Somewhere around 80 per cent is common, but the range across lenders is wide, and some will count certain income at 100 per cent.
What that costs you
The effect compounds. If a lender counts only part of your overtime, the shortfall reduces your assessed surplus, and lenders convert surplus into loan size at an assessment rate typically around three percentage points above the actual rate.
So a difference of a few thousand dollars a year in counted income can move your maximum loan by tens of thousands. Between the most and least generous lender on the same payslips, the gap is regularly six figures. Estimate your borrowing power.
How different types of pay are treated
Broad patterns, not rules. Each lender sets its own policy and the differences between them are the reason this is worth checking.
Usually shaded, commonly to around 80 per cent, with most lenders wanting to see it sustained over six to twelve months before counting it at all.
Nurses, police, paramedics, firefighters and some other roles are treated more generously by a number of lenders, in some cases counted in full, on the reasoning that the overtime is structural rather than occasional.
Where they are a permanent feature of the roster rather than ad hoc, several lenders count them at or close to full value.
Treatment depends on what the allowance is for. Ones that compensate for genuine expenses are often disregarded; ones that are effectively additional pay are usually counted, sometimes shaded.
Most lenders want two years of history and will average it, often shaded. A single strong year rarely counts for much on its own.
Similar to bonus: averaged over one to two years and commonly shaded, with the length of history mattering more than the size of any single payment.
What lenders ask to see
Consistency is what is being tested, so the evidence is about pattern rather than peak. Expect to provide recent payslips showing year-to-date figures, and in most cases a PAYG summary or tax return covering the previous financial year.
Where overtime has been sustained across two years, lenders can compare the two and will often use the lower or an average. Where it started recently, some lenders will not count it yet, and how recently is one of the clearer differences between them.
An employer letter confirming that overtime or an allowance is ongoing rather than temporary can help, particularly where a roster has changed or you have moved roles within the same organisation.
Timing matters more than people expect
Because most lenders read year-to-date figures, the point in the financial year at which you apply changes what your payslip shows. Applying early in the year, when year-to-date totals are small, gives a lender less to work with than applying later.
The same is true of a job change. Moving employers, even into a better-paid role, can reset the history a lender wants to see. That does not stop you buying, but it changes which lenders will count the overtime, and it is worth knowing before you resign rather than after.
None of this argues for waiting indefinitely. It argues for knowing where you stand and choosing the moment, rather than applying blind and being assessed on your least representative payslip.
Things worth getting right
Do not plan on your best fortnight
The most common disappointment is a buyer who has worked out their budget from a big pay period. Plan around the figure a lender will actually use, then treat anything above it as a buffer. It is a less exciting number and a much more useful one.
Casual is a different question
Overtime shading is about how variable income is counted. Casual employment is about job security, and lenders assess it separately, usually looking at how long you have been in the role and the industry. Some people face both questions at once. More on casual employment and home loans.
Second jobs
Income from a second job is often treated like overtime: counted if it has been sustained, shaded to allow for the possibility it stops. Lenders differ on how long is long enough, and a second job held for two years reads very differently from one started last month.
It affects what you can borrow, not whether you can
Variable income is a matching exercise, not a barrier. The question is which lender reads your particular pay structure most accurately, and that is a question with an answer. Get a proper assessment.
Where lender policy genuinely differs
How much overtime is shaded, and whether certain occupations are exempt from shading. How long the income must have been received before it counts. Whether year-to-date figures alone are enough or a prior year is also required. How allowances are classified. Whether a bonus needs one year of history or two.
On the same payslips, those differences produce materially different maximums. This is the clearest case on the whole site for comparing a panel rather than approaching whichever bank you already use.
What we do
Read your payslips the way a lender will, and work out what each part of your income is actually worth in an assessment rather than in your bank account.
Then match you to the lenders whose policy suits your pay structure. For essential services workers that often means finding the lenders that count overtime in full. For a bonus-heavy income it usually means finding the ones that need less history.
And give you a figure you can plan around, so you are not budgeting from a payslip that will not be used. Get your buying position in writing.
Put numbers on it
Borrowing power
A starting figure. Try it with your base pay, then with the full amount.
OpenBorrowing assessment
Your real number, checked across lenders rather than estimated.
OpenRepayments
What a loan of that size costs each month.
OpenDeposit strategy
What you need saved, and what each deposit size changes.
OpenFull cash requirement
Deposit, duty and costs at a specific price.
OpenHECS and borrowing power
The other common drag on an otherwise strong income.
OpenFind out what you could realistically borrow
With your overtime, allowances and bonus counted the way the most suitable lender would count them, not the way the first one you ask happens to. Free, no credit check.
Common questions about overtime and allowance income
Do lenders count overtime for a home loan?
Yes, most do, but usually not all of it. Lenders apply a discount to allow for the possibility that overtime stops, commonly counting somewhere around 80 per cent of it, and most want to see it sustained for six to twelve months first. Some lenders count overtime in full for particular occupations. The spread between the most and least generous is wide enough to change what you can buy.
Is overtime treated differently for nurses, police and paramedics?
By a number of lenders, yes. The reasoning is that overtime and shift penalties in essential services are a permanent feature of how the roster works rather than an occasional extra, so they can be counted more like base pay. Not every lender takes that view, and the ones that do apply their own definitions of which roles qualify, so it is worth identifying them rather than assuming.
How long do I need to have been earning overtime?
Six months is a common minimum and twelve months is safer, because at twelve months a lender can compare year-to-date figures against a full prior year. Some lenders will consider a shorter period where the overtime is clearly structural, such as a roster that includes it by design. This is one of the more variable policies between lenders.
Will my bonus count?
Usually, with two years of history, averaged and often shaded. A single strong bonus year rarely carries much weight on its own, because the lender cannot tell whether it repeats. If your income is heavily bonus-weighted, the length of your history matters more than the size of the most recent payment, and which lender you approach matters a great deal.
What about allowances like travel or uniform?
It depends what the allowance is really for. Where it reimburses a genuine cost you incur, lenders commonly disregard it, on the basis that the money is spent rather than available. Where it functions as additional pay, such as a site or shift allowance, it is usually counted, sometimes shaded. Your payslip wording and your employer's description both matter here.
Should I wait until I have more overtime history before applying?
Sometimes waiting a few months genuinely changes the outcome, particularly if you are close to a twelve-month mark or early in the financial year when year-to-date figures are low. Often it does not, because another lender would count the income now. The useful step is finding out what you could borrow today before deciding whether waiting is worth it.
Does a second job count?
Often, and it is generally treated like overtime: counted where it has been sustained, shaded to allow for it stopping. Lenders differ on how long is long enough, and a second job held for two years is read very differently from one started recently. Where the second job is casual, the job-security question applies as well as the shading question.
I changed employers recently. Does my overtime history carry over?
Not automatically. Many lenders want the history with your current employer, which a job change resets even if you moved into a better role. Some will consider a continuous history in the same industry or the same public-sector employer more flexibly. If a move is on the cards, it is worth understanding the effect before you resign rather than afterwards.
Related reading
Your pay is more than your base. So is your borrowing power.
Twenty minutes covers what each part of your income is worth in an assessment, and which lenders read your pay structure most accurately.