How to get a large mortgage with multiple income sources
If you’re a high earner you expect your income to get you access to substantial property finance on flexible terms. You don't want to be locked into a lender’s standard deposit and repayment conditions, with your borrowing limited because your earnings are "complex."
In our experience, all our HNW clients have complex incomes, made up of varying combinations of salary and bonus, company earnings and dividends, overseas and foreign currency remittances, investment earnings and trust funds.
What are the issues?
1 Availability of lenders
There’s no doubt that when you’re looking for borrowing of more than £1m, with an LTV above 75%, the pool of available lenders is more limited.
It’s not so much an issue of an individual lender’s access to funds so much as their comfort with the level of risk in having a substantial sum tied up in the value of just one property.
The higher echelons of the prime and super-prime real estate market are just as vulnerable to price discounting in uncertain economic times as low to mid-priced properties.
In fact, they are sometimes more likely to be subject to discounting – offering excellent opportunities, of course, to buyers who have their finance lined up.
When the high-street banks and building societies opt for caution, they leave the field open to private banks and funding institutions who are willing to look at each case on its own merits, and approve bespoke funding packages.
Most of these private lenders aren’t accessible to individual borrowers: you’ll need an experienced broker intermediary who will know the lenders’ criteria and will be able to take your application to the finance house that will be most willing to consider a creative solution for it.
2 Complexity of income
We won’t labour the point, but an income from a variety of local and international sources is more… complex.
Your broker is required to assure themselves – and you – that any finance product they propose is the most cost-effective and appropriate funding for you. That means they have to verify the sources of your earnings.
Your investment income, for example, may not be required as part of your affordability assessment, but each income stream nonetheless needs to be disclosed and verified. It isn’t sufficient for us to declare to a lender your total annual earnings: some lenders are averse to earnings from particular sources, for example overseas trusts, or residential rental properties (because of a perceived difficulty in evicting tenants in case of a default).
3 Detailed verification
Employed income, no matter how complex (including bonuses, profit share, benefits etc) is comparatively easy to substantiate as your broker can request letters of confirmation from your employer.
Private company income, and other private earnings, will need to be substantiated by evidence from you, or your accountant.
4 Long-term track record of earnings
Lenders like a long-term record of earnings, and that’s why we’ll submit your CV with your application: it helps to demonstrate to lenders how you have built up to your current level of earnings, and reassure them that your income is sustainable despite the potential vagaries of company profitability, currency fluctuations or shareholder voting.
5 Uneven earnings
Profit share, and quarterly and annual bonuses, don’t make for a steady income stream to service substantial borrowings. Your broker will need to propose ways in which you can maximise your borrowing at the lowest cost, even if you’re not able to make regular monthly capital repayments.
6 A desire to keep funds liquid
On the whole, HNW clients haven’t built their wealth by leaving their money sitting in a bank or servicing property loans. Most of our £1m+ clients are looking to maximise their LTV to 75% or more, and as far as possible maintain access to their funds for investment opportunities.
The solutions we can propose
1 Assurances in relation to offshore earnings
To satisfy money-laundering regulations, lenders need to be assured of the tax paid on any foreign currency earnings. Earnings remitted from low-tax and tax-free jurisdictions can cause concerns.
2 Assurance of future earnings
In some situations, a lender can be persuaded to consider anticipated earnings as well as current income, with the support of a strong CV.
3 Flexible offset mortgage
For clients who want to be able to have access to liquid funds, a flexible offset arrangement allows them to keep their cash reserves in a savings account linked to their mortgage.
4 Interest-only mortgage
For clients with salary packages featuring periodic bonus payments or require flexibility on the repayment structure a interest only mortgage can be an excellent solution.
How you can help
The most creative, and cost-effective financial solutions emerge when clients keep an open mind about their borrowing needs, and give us not only the information they think we need, but their complete financial profile.
As one of our specialist brokers comments: "Clients usually approach us with details of their earnings and a fixed amount they want to put down as a deposit, and start with the question: 'How much can we borrow?'
"If, instead, they are able to be more flexible and tell us the maximum they can pay as a deposit (in addition to their income details), we can work back from that to give them a number of affordability scenarios."
Contact Clifton Private Finance
Give us a call now and we’ll arrange a time that suits you for a detailed discussion: