Your Payslip Says One Thing. Year to Date Says Another

Your payslip says you earn more than the bank thinks you do. The reason is a column nobody looks at.

Year to date. Usually tucked down the right hand side, or at the bottom, under a heading like YTD. It is the total you have been paid since the financial year started on 1 July.

You have probably never read it. Lenders read it first.

One payslip is a snapshot and a snapshot can lie. A fortnight with a stack of overtime in it. A bonus that landed that week. A pay period that happened to include a back payment. Take that single payslip, multiply it out, and you get an income figure that nobody actually earns.

Year to date fixes that, because it covers months rather than a fortnight. Most lenders will take it, work out what it annualises to, and compare that against what your current payslip claims. If the two agree, your income is settled and nobody asks another question.

The problem is that it cuts both ways, and right now it is cutting the wrong way for a lot of people.

We had a first home buyer in this week whose last two payslips were well up on what she was earning earlier in the year. New pay, properly earned, all good news. Except year to date blends the new pay in with the old pay, and the average lands somewhere in the middle.

The arithmetic is easy to see once you put numbers on it. Say you were on $70,000 and from the start of September you are on $85,000. Illustrative figures, and the shape holds whatever the real ones are.

By the end of September your year to date is three months of pay. Two of those months at the old rate, about $11,667. One at the new rate, about $7,083. Total $18,750.

Annualise $18,750 over three months and you get $75,000.

Ten grand of your income has quietly gone missing. Not a fortune, and enough to move what a lender is willing to lend you, which is the number that decides what you let yourself look at.

The financial year reset on 1 July, so year to date is only a few months old. Every old pay period in there carries a lot of weight. The same pay rise, looked at in May, barely shows up at all, because eleven months of the new pay drowns out the start of the year.

So a pay rise in August is a problem in October and a non event by autumn. Same person, same income, different answer depending on when they apply.

It runs the other direction too, and it is worth being honest about that. If your income dropped during the year, or you took a stretch of unpaid leave, year to date flatters you compared with what you are earning now. Lenders know, which is why they look at a current payslip as well as the year to date figure, and generally work off whichever reading is the more conservative.

Some will annualise your current base salary and use it, with year to date as a sanity check. Some take the lower of the two on principle. Some want a full year at the new rate before they will accept it, which is the strictest reading and the one that hurts most. For overtime, bonus, commission or shift loading, most want a longer history, often six or twelve months, sometimes averaged across two years, and some will only count a portion of it.

Same payslip, same person, genuinely different numbers depending on who assesses the file. Knowing who reads what is a real part of the job and it is most of the value in having someone do this for you.

What fixes the pay rise problem is paperwork, and it is not much of it.

Then say it out loud at the start. If you got a rise after July, tell whoever is working out your numbers before they work them out, not after they come back lower than you expected.

The figure you get given on a first phone call is only as good as what was in front of the person giving it. If that number came back smaller than you thought and nobody asked you when your pay last changed, it is worth redoing properly. People stop looking at houses above a figure they were handed casually, and nobody ever rings back to say the figure was wrong.

If you are casual or part time, year to date matters more rather than less, because your income is genuinely variable and the average is the fairest read of it. A quiet stretch or unpaid leave sitting in there will drag the figure, and that is worth explaining in writing rather than hoping nobody notices.

If you have just changed jobs, year to date from the new employer is short by definition. Some lenders will work with a first payslip and a contract. Some want you through probation. This is one of the clearest examples of policy deciding an outcome rather than the file itself.

And if you are serving, there is another layer. A defence payslip is a base with separate allowance lines sitting on top, and every one of those lines gets read differently from lender to lender. Add a posting that changed partway through the financial year and the year to date figure stops describing your current pay altogether. That is a longer conversation and it is covered properly in the article on how lenders read defence allowance income.

When was your last pay rise, before July or after? If it was after, your year to date column is telling the bank an old story about you. Book a call and we will run the figure properly.