I recently managed to secure a loan on bonus income for a middle-aged couple looking to purchase a £1.6m home.
I was approached by a middle aged couple who wanted to buy a new residential house in Hertfordshire. They were looking to raise a loan of £860,000, but their financial set-up was a little complex.
As a banker, the majority of his income came in bonus form, and he was also making significant pension contributions every month. She was self-employed and, because her company was still in its infancy, its figures from the past year were weak; in fact, it was only just starting to break even. This meant that, for mortgage purposes, her income was minimal. In other words, they had little that would instil confidence in a standard lender.
There were a number of challenges I needed to overcome. Firstly, most lenders are only prepared to take a percentage of bonus income into account. In addition, many cap bonus income at 100% of a borrower’s basic salary. To complicate matters even further, where a loan exceeds £500,000, income multiples are often reduced. Finally, given the figures that her business was reporting, many lenders would classify her as a financial dependant. I therefore had to think very carefully about which lender to approach.
In coming to my solution I found a lender who would take the entirety of my client’s bonus into account and not cap it at 100% of his basic salary; this conveniently also got around the reduced multiples that are applied over £500,000. The chosen lender took a favourable view of his pension contributions, and I was also able to persuade an underwriter that she was not financially dependent; on the contrary, I managed to demonstrate that her business revenues and profit were growing year on year.
My clients were particularly sensitive to rate, and they were delighted with the product I ultimately managed to secure for them: a highly competitive 5 year fixed rate mortgage.