How Banks Read Your Payslips

Published by Otto Dargan on June 3, 2014

When you apply for a home loan you’ll be asked to provide certain documents to support what you have written on your application form.

One of the most important documents, and most poorly understood, are your payslips.

What do the banks need?

Most lenders will ask for your two most recent, consecutive payslips that are no more than six weeks old. If you are paid monthly then your two most recent payslips are fine even if they are a little older.

If your employment is complicated or you receive other income types such as overtime, bonuses or commission then you may need to provide additional payslips, your tax return or group certificate.

What are they looking for?

They look at your payslip in a totally different way to how you do. Firstly, you’re probably focused on your net pay whereas they use your gross income in their assessment.

They’re going to assess:

  • Your gross income.
  • Any deductions (e.g. novated lease, additional super, HECs / HELP debt)
  • Your year to date (YTD) income.
  • The variation in your income between your two most recent payslips.
  • Your income type.
  • If annual leave is showing (this catches out casual employees!)
  • If your name, employer name and Australian Business Number are visible.

What mistakes do the banks make?

Banks are terrible at reading payslips! Even common payslips for nurses and police can be very complicated which leads to the banks making mistakes.

  • They often get your income incorrect, in particular if you receive allowances and overtime.
  • They forget that you can cancel additional payments to super.
  • They have no idea what salary packaging is!
  • They miscalculate your annual pay from your YTD income.

As a general rule, if there are two ways to assess your income and one of them is more conservative then the banks will choose that one!

Do you need a mortgage broker who knows how to fix the bank’s mistakes? Give us a call on 1300 889 743 or fill in our free assessment form and one of our mortgage brokers will help you out.

Which borrowers come unstuck?

If your payslips look like alphabet soup then you’re going to get asked some questions from the bank. Many assessors these days are offshore and, to be quite frank, they haven’t been trained properly. We usually make notes on our customer’s payslips so we don’t have any delays.

People in a casual or temporary job or those that work on a contract basis run into the biggest trouble.

Lastly, some people don’t get issued with payslips by their employer! It’s actually required by law for your employer to give you payslips but, in the interests of you keeping your job, let’s not cause a fuss. You can just use another method of proving your income.

Can I verify my income in another way?

Some of our banks are getting really clever in the ways that they verify your income.

Some of them can look at your bank statements to confirm the regular net salary that you are receiving. Others will accept a letter from your employer, your tax return or Notice of Assessment as sole proof of your income.

As a general rule, if you are borrowing 80% of the property value or less (80% LVR) then they won’t require as many documents.

Apply for a home loan

Our mortgage brokers are experts in helping people in difficult situations to get approved. In fact, many of them have worked in a bank as the person who approves and declines applications!

Call us on 1300 889 743 or fill in our free assessment form to find out if we can help.

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