Complex Income - How to Secure a Mortgage

06-September-2023 16:44
in Mortgage
by Sam Hodgson
Complex Income - How to Secure a Mortgage

If you're earning a mixture of salary, dividends, bonus, rental, or other forms of income, you could struggle to reach your full borrowing potential when it comes to getting a complex income mortgage.

Many high street lenders will just take your largest source of income and exclusively use that figure for their income multiplier calculations.

Even if you supplement your income from self employed work, earn rental income, or can easily liquidate some capital, some banks won’t put in the extra legwork to factor this into their mortgage calculators.

The Solution

There are specialist lenders out there equipped to deal with complex mortgage cases, but you may need to speak to a specialist mortgage broker to consolidate your application and connect you with the right ones.

In this guide, we look at what lenders classify as complex income, why it's difficult to get a mortgage with one, and how you can get around the hurdles.

Complex Income - How to Secure a Mortgage

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In This Guide:

What is a complex income mortgage?
What is classed as complex income?
Why is it difficult to get complex income mortgages?
How can you get a mortgage with complex income?
Should I use a mortgage broker for a complex income mortgage?

What is a Complex Income Mortgage?

A complex income mortgage is a mortgage for anyone earning money through multiple sources or via unorthodox income streams.

It could be foreign currency income, a mixture of different types of earnings, or just an irregular and varying income pattern that separates your income from the norm.

And because some banks and mortgage lenders don’t deal with these complex income cases very often, they’re not always equipped to deal with your application in the appropriate way.

If this is the case, you might not be able to get the full loan size you want despite earning enough to qualify for it.

Related: If you're a HNW client, read our guide to HNW mortgages.

What is Classed as Complex Income?

Here’s a list of complex income examples for mortgage applications and the types of income that we see most people struggle with:

  • Company directors

If you’re the director of a company, then you probably earn a combination of salary, dividends, directors' loans and other income streams, which may be too complicated for some lenders to facilitate.

Read more: Mortgages for company directors: how to use company profit to get the size of loan you need

  • Professionals with multiple income sources

This can include doctors and medical professionals, solicitors, barristers and accountants - including those who do ad hoc freelance work full-time or on the side.

Or, if you work overtime during certain periods of the year - your actual annual income figures may not be written into your contract, and you could struggle to get your overtime factored in.

  • Contractors

Particularly if your earnings are irregular and fluctuate based on big projects or contracts throughout the year, you may struggle to get the full value out of your income.

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  • Entrepreneurs

You could have issues reaching your mortgage potential if you have income streams from multiple businesses, rental income from a property portfolio, or perhaps a stock portfolio producing investment income and providing capital to sell.

Read more: Mortgages for Entrepreneurs and Venture Capitalists

  • Expats and earners in a foreign currency

If you’re living and working abroad and looking to buy property in the UK, you could struggle to verify your income, particularly if you’re earning in an overseas currency.

Read more: UK Mortgages For Expats

  • Working in the gig economy

If your earnings dip during certain months of the year and come through irregular channels at varying income amounts, you could be seen as higher risk by lenders and struggle to get accepted.

Complex Income - How to Secure a Mortgage

Why is it Difficult to Get a Complex Income Mortgage Product?

There are three main reasons our clients struggle with when getting mortgages with a complex income.

Knowing the issues you could face will help you understand how you can make your income more attractive to lenders before you even apply.

1. Complex income can be higher risk for lenders

Particularly if your earnings are irregular, from multiple sources or in varying amounts, lenders will naturally worry about your ability to make mortgage repayments if your income falls through or pauses for an extended period.

If you can prove the consistency of your income through previous years of tax returns and SA302 forms, then you can make your income more robust for your mortgage application.

But also, speaking to a specialist mortgage broker who can connect you to the right lenders with knowledge of specific industries will give you a greater chance of securing the levels of finance you need.

2. Complex income is a greater administrative burden for mortgage lenders

A lot of large lenders and high street banks are only adapted to the general public and your typical sources of employed, regular income. Mainstream lenders may struggle to process complex income portfolios containing multiple sources and currencies.

But that’s where a specialist lender comes in.

Some lenders do have the procedures and team in place to get a comprehensive and realistic interpretation of your income and offer you a better mortgage at competitive rates.

And a specialist mortgage broker like Clifton Private Finance can connect you with the best lenders for your unique situation.

Complex Income - How to Secure a Mortgage

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3. Higher risk of fraud

It requires more administration work to verify an overseas employer for your income compared to a UK company, and it also presents a higher risk of fraud to mortgage lenders.

With language barriers and cultural and legal differences between jurisdictions, it can muddy the water and put lenders at a higher risk of being exposed to financial crime – unless they have the right specialists in place to confidently assess your case.

How Can You Get a Complex Income Mortgage?

Here are our top tips on how you can make your complex income more appealing to lenders and more robust for your application:

1. Get your tax documents and proof of income together

Consolidate your tax returns, SA302 and Tax Year Overview documents in advance of your mortgage application to bolster your proof of income when requested.

Read more: How to Find and Download Tax Documents for a UK Mortgage

However, even if you don’t have a recent tax return or proof of your other wealth sources – don't panic, as there may still be ways you can leverage this income.

If you’re earning self-employed income overseas it can get more complicated as you’ll need different documents – speaking to an accountant who can consolidate your tax information is recommended.

2. Check your UK credit score and iron out any issues before applying for your mortgage

You can check your score for free here:

  • Experian
  • Equifax
  • TransUnion

For tips on how to improve your credit score, read this: How To Get a Mortgage - 19 Top Tips for Borrowers

Again, don’t panic if you have a patchy credit rating – there are still lenders that will offer you a mortgage.

For example, if you're a British expat returning to the UK, you may have a limited UK credit history.

Some of the larger banks may reject your application because of this, but a specialist mortgage adviser can help you get around these hurdles and secure a mortgage.

Read our case study below for a UK expat High Court Judge earning a foreign income looking to buy property in England. 

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3. Get the right loan to value, deposit band and income multiplier rate

If you are trying to stretch to a mortgage for 5 or 5.5 times your income, then you have to be realistic with what you’ll be able to get and how much of a deposit you may need to put down.

While there are lenders and private banks out there who can lend against higher income multipliers, it won’t always be the case and you may need to put down a higher deposit to help your application.

If you’re unsure how far your income or deposit will get you, speaking to a mortgage adviser can help clarify exactly what income and deposit you’ll need for your ideal property purchase.

We can also offer advice on whether an interest only mortgage, fixed rate or tracker mortgage may be right for you depending on your current situation, whether you're a mortgage expert and portfolio landlord, or a first time buyer. 

Read more: What Mortgage Can I Get - Our Top 7 Ways of Borrowing More

Complex Income - How to Secure a Mortgage

Should I use a mortgage broker for a complex income mortgage?

As we’ve seen, many mainstream lenders struggle to provide competitive mortgages to individuals with a complex income structure:

  • It costs more to invest the resources into approving your application (verifying your income, factoring in risk etc.)
  • Lenders can assume a higher risk that you default on your mortgage payments if they don’t understand your income
  • There’s a higher risk of fraud with unfamiliar and foreign income streams, which lenders have to take precautions with

So if you do have a more complex income than with a standard mortgage application, you could have a smaller lending pool to choose from.

But specialist lenders have the resources in place to provide property finance against unusual income streams – you just need to find them.

The problem is that a Google search won’t get you very far – specialist lenders and private banks don’t always make it clear what types of applicants they accept and what specialists they have available.

They often rely on mortgage brokers who understand their bespoke services to connect them with the right borrowers, without having to sift through applications that aren’t right for them.

And as a borrower, it works in the same way.

It’s very difficult to compare mortgage rates if you have complex sources of wealth - every lender you speak to needs to know the full details about your case, and it's time-consuming to say the least.

Instead, a specialist mortgage broker can identify the best lenders for your requirements and streamline the application process through to completion, providing you with a wide range of the best finance options to suit your requirements.

Give us a call

Contact us to arrange a convenient time for an in-depth first discussion with one of our trusted finance brokers and see how we can help:

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0117 959 5094

Or click here to make an online enquiry with us.