I recently helped a client secure a residential loan for a London property using complex bonus income. My client had previously lived in the UK but moved to Monaco with his job at a boutique hedge fund. Due to the arrival of a new child, he had decided he would rather purchase a new family property and relocate back to London rather than continue to rent in Monaco.
The property was a £2.5million three bed, end of terrace home in West Kensington, for which my client wanted to raise £1.2million at 60% loan to value (LTV).
The main issue in his application was the make-up of his income; although his annual income was high, the vast majority of this was made up of bonuses which were not just made up of one currency but two – euros and US dollars. After living outside of the UK for a few years, his resultant lack of UK credit footprint ruled out high street lenders, and left him with two options – a private bank or a building society.
Initially, the client was not comfortable with the building society’s request for an employer reference and so opted for the private bank option, as it did not require this. However, a further issue was soon encountered because due to certain technicalities and Mortgage Credit Directive regulation, the private bank was only able to track one currency. Effectively, this meant the lender would not consider the main bonus element of my client’s income despite our evidential documents, as they simply could not facilitate both currencies.
Due to the private bank’s inability to accept both forms of currency, this severely affected my client’s affordability on paper. As a result, he decided to go back to the original building society lender and accept the employer reference as it proved a much more affordable option and could facilitate his whole income.
Although the employer refused to provide evidence of the client’s bonus history, I managed to present 3 years’ worth of bank statements to serve as evidence. In combination with my strong relationship with the lender, I secured the full loan on a purely interest only basis over 25 years on a discounted variable rate product for a very happy client.
This product was particularly good in this case as although my client’s main annual income was strong, his main income was predominantly made up of an annual cash bonus. His cash flow from month to month was thus considerably lower and made it more difficult to secure a loan for this type of property. Borrowing on an interest only basis solved this problem as it would reduce his monthly payments with a view that when he received his bonuses he can make additional payments to reduce his loan.
During the negotiating process, it also became apparent the solicitor my client was using was not acceptable to the lender. The solicitor was not on the building society’s panel, nor could he be, as he did not satisfy the lender’s minimum Solicitor’s Regulation Authority (SRA) requirement.
If they wanted to continue with the same solicitor, the lender would have to instruct their own solicitor to carry out the process which would result in further fees. My client’s solicitor refused, due to the sheer expense which the client would incur and added to time to the already tight deadlines. Under extremely tight timescales, I instead managed to obtain a new solicitor to step in and carry on the file from the previous solicitor, at a much cheaper charge than it would have cost to keep the original solicitor under the lender’s terms.
For a consultation on how we can make your bonus work best for you when applying for a mortgage, please get in touch with one of our expert brokers. Our experienced market knowledge and strong relationships with lenders provide us with the skills to apply a simple solution to your complex financial problems.