Mortgage Declined Because Bonus Payments Were Not Guaranteed: Why It Happens

A mortgage declined because bonus payments were not guaranteed is a common and often confusing outcome, particularly for applicants whose bonuses make up a significant part of their income. While bonuses may be paid regularly and feel reliable, lenders treat them very differently from basic salary when assessing affordability.

This guide explains why non-guaranteed bonuses raise concerns, how lenders assess bonus income in practice, and what usually needs to change before a mortgage application can succeed.

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Why do lenders treat bonus income cautiously?

Short answer: because bonuses are not contractually certain.

Expanded explanation:
Mortgage payments are fixed and ongoing, while bonuses are typically discretionary. Lenders must be confident that repayments remain affordable even if bonus income:

• Is reduced
• Is delayed
• Does not materialise at all

If a bonus is not guaranteed in an employment contract, lenders cannot assume it will continue at the same level in future years.

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What does “not guaranteed” actually mean?

Short answer: the employer is not obliged to pay it.

Expanded explanation:
A bonus is usually classed as non-guaranteed where:

• It is discretionary
• It depends on performance or company results
• It can be withdrawn or reduced
• There is no minimum payment stated

Even where bonuses have been paid consistently, lenders focus on contractual obligation, not historic habit.

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Why this can lead to a mortgage decline

A decline often occurs when:

• Bonus income forms a large proportion of total earnings
• Basic salary alone does not support the mortgage
• The lender excludes the bonus entirely
• Affordability only works if the bonus continues

From a lender’s perspective, approving a mortgage that relies on uncertain income increases the risk of future payment difficulty.

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How lenders assess bonus income in practice

Short answer: conservatively, and often inconsistently.

Expanded explanation:
Different lenders take different approaches. They may:

• Ignore bonus income altogether
• Average bonuses over several years
• Use only a percentage of bonus income
• Cap the amount of bonus used
• Require a minimum track record

If a bonus is not guaranteed, many lenders default to the most cautious option.

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Does consistency of bonuses matter?

Yes, but it has limits.

Short answer: consistency helps, but does not guarantee acceptance.

Expanded explanation:
Lenders are more comfortable where:

• Bonuses have been paid regularly over multiple years
• Amounts are broadly consistent
• The applicant remains in the same role and industry

However, even long-standing bonus histories can be excluded if there is no contractual obligation.

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The role of employment contracts

Employment contracts are key.

Lenders will often review:

• Whether the bonus is discretionary or guaranteed
• Any wording around targets or conditions
• Whether a minimum bonus is stated

If the contract clearly states that the bonus is discretionary, lenders may choose not to rely on it, regardless of past payments.

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How bank statements influence bonus decisions

Bank statements are used to verify receipt, not guarantee continuation.

Lenders check:

• That bonuses shown on payslips were actually received
• Timing and frequency of bonus payments
• Whether bonuses are relied on to cover regular bills

If statements show that normal living costs depend on bonus income, lenders may view affordability as stretched.

We cover this in more detail in our guide on what lenders look for on bank statements.

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Why some applicants are affected more than others

This issue is particularly common for:

• Sales roles with commission-heavy pay
• Senior or executive roles with large bonuses
• Finance and professional services roles
• Applicants stretching borrowing limits

Where bonus income forms a small part of total pay, it is less likely to cause a decline.

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Is this different from commission income?

Slightly, but the principles are similar.

Short answer: both are variable, but bonuses are often less predictable.

Expanded explanation:
Commission may be linked directly to output and paid frequently, while bonuses:

• Are often annual or irregular
• Depend on wider company performance
• Are more discretionary

As a result, some lenders treat commission more favourably than bonuses, especially where it forms part of regular monthly pay.

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Can employer letters help?

Sometimes, but with limits.

Short answer: confirmation helps, but does not override discretion.

Expanded explanation:
An employer letter may confirm:

• Bonus structure
• Historical consistency
• Likelihood of continuation

However, if the bonus remains discretionary, many lenders will still limit or exclude it from affordability calculations.

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Is this a permanent decline?

Often not.

Short answer: this is usually lender-specific, not applicant-specific.

Expanded explanation:
A decline for non-guaranteed bonuses does not mean you are unlendable. It usually reflects:

• A conservative lender approach
• High reliance on bonus income
• Timing of the application

Different lenders assess bonus income differently, which is why lender selection matters.

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How this affects borrowing amounts

Even where lenders proceed, they may:

• Reduce the income figure used
• Exclude bonus income entirely
• Apply stricter stress testing

This can result in a lower loan amount than expected, even if the mortgage is approved.

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What usually helps before reapplying?

Practical steps include:

• Reducing reliance on bonus income
• Applying with a lower loan amount
• Building a larger deposit
• Allowing more bonus history to build
• Choosing lenders known to accept bonus income

Professional advice can help identify lenders whose criteria better match bonus-based earnings.

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Should you wait for bonuses to become guaranteed?

Not always realistic.

Short answer: guaranteed bonuses are rare.

Expanded explanation:
Most bonuses remain discretionary by design. Rather than waiting for contractual changes, applicants often have more success by:

• Adjusting borrowing expectations
• Improving affordability without bonuses
• Selecting appropriate lenders

Understanding how lenders view bonuses can prevent repeated declines.

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Is this an affordability or income issue?

Short answer: it’s about certainty, not amount.

Expanded explanation:
Applicants may earn substantial total income, but lenders prioritise:

• Guaranteed income
• Predictable cash flow
• Long-term sustainability

This is why high earners can still face declines when bonuses are central to affordability.

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Key points to understand before applying

• Non-guaranteed bonuses are treated cautiously
• Consistent history helps but does not guarantee acceptance
• Contracts matter more than past payments
• Lender approaches vary widely
• Borrowing may need to work without bonuses

Understanding how bonus income is assessed can help avoid unnecessary declines and delays.

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This guide provides general information only. Personalised mortgage advice should always come from a regulated mortgage adviser.