I am regularly approached by clients who struggle to secure a mortgage, despite their healthy income, because of the way their earnings are structured. For example, arranging a mortgage using multiple incomes is often a real challenge.
I recently advised an entrepreneur who had built up his business over many years. Having capitalised on his passion for fitness, my client had launched his own gym. The gym membership fees made up the bulk of his revenue and were his primary income stream. After many years of hard work and investment in his business, my client was now ready to purchase his ‘forever’ home. Having historically invested most of his wealth, my client was looking for a high loan to value (LTV) of around 80%. The property he hoped to purchase was a semi-detached house in West London, valued at £1.9million.
However, within the gym, he also ran an on-site café and a shop. These three distinct arms of the business had been set up as three different entities with distinct names, but were all held by the same shareholders and were all closely tied in with one another. This structure meant my client was struggling to find a lender who would consider 100% of his income from across all three business when assessing his affordability.
This is a typical attitude from high street banks, who will generally not consider 100% of the income from multiple income streams in their calculations. Even though they were visibly under the same umbrella of the fitness company, high street banks will generally perceive that it is unsustainable for one individual to run three businesses long term. Despite the clear relationship between the three entities, the high-street banks’ tick-box criteria meant my client was unable to progress down this route.
Fortunately, I have access to a range of lenders who I felt confident would be able to take all of my clients’ income into account. I approached a lender I thought would be suitable and outlined the details of my client’s business and income structure. I highlighted these businesses existed under the same roof—although they traded under different names, they were essentially three different branches of the same tree.
I also explained my client’s background in depth; his children were no longer dependent, and he had a clear track record of success which indicated his business would continue to be a solid source of income. The lender was happy to proceed on this basis, and I secured terms for my clients for a 5-year fixed rate of 2.39% on a capital and interest repayment basis.