By Josh Tagg, mortgage broker · Mortgages for Less with INDI Mortgage · Calgary, serving all of Alberta ·
Quick answer: Lenders usually count overtime, bonus and shift premiums by averaging the last two complete tax years, using your T4s, as long as the income is steady or rising. If it fell, they use the lower, more recent year. Overtime you’ve only earned this year usually doesn’t count yet. On an $85,000 base salary, $20,000 of averaged overtime raises what you can borrow from about $341,000 to about $437,000.
In Alberta, overtime and shift pay are a big part of many paycheques, especially in the trades and energy work. It’s also the income that’s easiest to misjudge. Buyers often plan on last year’s best number, and the lender uses something lower.
How do lenders count overtime and bonus?
In our placement experience, the default is a straight average of the two most recent complete tax years, documented with your T4s, an employment letter and a recent pay stub. Your year-to-date pay is checked to make sure the average still holds up.
Your base salary or guaranteed hours count from day one. The variable part is what needs history. That’s why the employment letter matters: ask your employer to show your base pay separately from overtime, bonus and premiums.
Which two years? The two most recent complete tax years. For an approval in late 2026, that’s 2024 and 2025. Once December 31 passes, a final year-end pay stub can show 2026’s earnings until your T4 arrives.
What if your overtime went down?
Then the lender usually uses the lower year, not the average. Averaging is for income that’s rising or roughly flat. A small dip may still be averaged by some lenders; a real drop isn’t.
Here’s a buyer with an $85,000 base salary, $450 a month in property tax and heat, and no other debts, tested at 6.64% (the best insured 5-year fixed we tracked as of October 26, 2026 was 4.64%, plus 2%) over 25 years.
Same base salary, three overtime histories
| Overtime history | Overtime counted | Income used | Largest mortgage |
|---|---|---|---|
| Rising: $18,000 in 2024, $22,000 in 2025 | $20,000 (two-year average) | $105,000 | about $437,000 |
| Falling: $28,000 in 2024, $14,000 in 2025 | $14,000 (the lower, recent year) | $99,000 | about $408,000 |
| New: overtime only started this year | $0 | $85,000 | about $341,000 |
The falling case is the one that surprises people. Both years together average $21,000, more than the rising case. But because the trend is down, the lender counts only $14,000, and the buyer qualifies for about $29,000 less than the rising case.
What about shift premiums, living-out allowance and EI?
- Shift premiums are treated like overtime: they need a history, and they’re averaged.
- Living-out allowance counts only if it’s taxed and on your T4. Untaxed allowance doesn’t count toward qualifying.
- EI between jobs, common for tradespeople and apprentices between contracts, is usually averaged with your employment income over the same two years, using your T4 and T4E slips.
- Guaranteed hours are different. If your hourly job has guaranteed full-time hours in writing, the lender uses hours times rate today. If the hours aren’t guaranteed, it averages two years of actual earnings.
Can this year’s overtime count?
Sometimes. For employees, some lenders will use your current year-to-date income in place of a weak older year, or average it with last year when it’s higher. This doesn’t apply if you’re self-employed or work for a family business. Those need two years of filed tax returns. If this year is your strongest, it’s worth asking which lenders will look at it, because the answer differs.
When doesn’t this apply?
If you’re paid a straight salary with no variable pay, none of this affects you: your salary counts. If you’re self-employed or own the company that pays you, different rules apply, based on your tax returns. If you’ve just changed jobs, see can you get a mortgage after starting a new job in Alberta. And if you’re buying soon after a big overtime year, plan on the lender’s number, not your best year.
Frequently asked questions
How do mortgage lenders calculate overtime income?
Usually by averaging the overtime on your T4s for the last two complete tax years, as long as it’s steady or rising. If it went down, most lenders use the lower, more recent year instead.
Does bonus income count for a mortgage?
Yes, with history. A bonus is treated like overtime: averaged over two years, or the lower year if it’s falling. A first-year bonus usually doesn’t count yet.
Does living-out allowance count for a mortgage in Alberta?
Only if it’s taxed and shows on your T4. Untaxed living-out allowance doesn’t count toward qualifying.
What documents do I need to use overtime income?
Usually your T4s for the last two years, an employment letter that separates base pay from overtime and bonus, and a recent pay stub. Ask your employer for that breakdown early.
Can I use this year’s overtime if it’s higher?
Sometimes. For employees, some lenders will use current year-to-date income in specific cases, such as replacing a weak older year. It doesn’t apply to self-employed income. Ask which lenders allow it before you count on it.
Not sure what your overtime counts for? Send me your last two T4s and a recent pay stub, and I’ll show you the income a lender will use and what it buys.
This is commentary, not advice. Rates and figures as of October 26, 2026. Rates change daily. How a lender counts variable income varies by lender and file; the methods above are this office’s experience placing Alberta files. All mortgages are subject to lender and insurer approval. Josh Tagg, Mortgages for Less, a team at Indi Mortgage.
