I recently secured a £2m loan on commission income for a client. He had had a great deal of trouble sourcing the £2.75m he needed before eventually contacting us at Enness.
My client in this case owned a £5m property in Central London. He already had a £1.8m loan on this property and was looking for a further £1m to fund the purchase of a holiday home in France, bringing the total to £2.75m.
He worked at an Asset Management fund, where his basic salary was small relative to the size of the mortgage he wanted. He was, however, receiving commission on a quarterly basis based on performance, and this constituted most of his income.
When he started looking to raise the extra £1m, he was faced with a wall of rejections. His own bank refused to lend him any more, and other mortgage brokers didn’t feel able to help and turned him away. He came to us disheartened and thoroughly frustrated.
I had a solution for him 30 minutes after our very first meeting.
The key to securing a loan for him lay in differentiating the commission he received from bonus income. Lenders are famously wary of bonuses, and place restrictions on the amount of bonus income they will take into account when calculating the maximum loan they are prepared to offer.
In this case, however, we were able to demonstrate that commission income is a very different prospect and much less is left to chance. Because they were satisfied that my client was receiving regular, quarterly instalments, this bank took 100% of the commission he was receiving into consideration.
The £2.75m loan we secured was about 5 times his annual income. We agreed a rate of 3%, fixed for 5 years – and, to top it off, £2m of the loan was on an interest only basis.