Over the last few years we have seen a significant increase in the number of bonus income mortgage applications. Mortgage loans for real estate and commercial property are based on affordability which is traditionally based upon basic income. Many of our clients are high net worth individuals and as a consequence often have bonus payments structured into their salaries. It may be a commission based salary or one which attracts annual bonuses depending on company performance and individual sales. We have a huge amount of experience in securing bonus income mortgages, exceeding traditional ratios and barriers to entry.
Can you use bonus income to qualify for a mortgage?
There are high street mortgages which will take into account bonus income and other non-core salary remuneration. The problem is that the vast majority will only accept 50% of regular bonus income when calculating an individual’s mortgage eligibility factor. Bonus income mortgage applicant will also need to show a track record of regular payments over a number of years with the same employer. There is also an issue with stock allocation because only cash payments will be included in the 50% bonus calculation – you must provide proof of bonus for mortgage payments such as a payslip/P45.
In our experience this is extremely restrictive and using our contacts we have been able to significantly enhance these basic terms. The amount of variation will depend upon your personal financial circumstances as every client is different.
How to calculate bonus income for mortgage
Due to our independent status we have access to literally hundreds of mortgage lenders not only across the UK but internationally. As a consequence, we have managed to negotiate significant improvements on stand-alone/off-the-shelf bonus income mortgages. To fully utilise your bonus payments we have managed to arrange deals which:-
- Recognise 100% of cash bonus payments
- Include vested/deferred bonuses as part of your application
- Take into account bonus payments which may not yet have a track record
- Create a separate repayment vehicle using bonus income to pay down interest only mortgages
- Arrange “bullet repayments” which can reduce headline interest rates/increase loan to value ratios
These are just an example of some of the improvements we have managed to obtain a regular basis for our clients. Our reputation opens doors; our experience is invaluable and ultimately allows us to put together a bonus income mortgage package moulded around your specific financial situation.
Are bonuses included in debt to income ratio?
As we touched on above, we are able to significantly increase the amount of bonus income included in your debt to income ratio. This allows us to fully utilises current and future income and secure a greater loan to value ratio. Even a relatively minor increase in the recognition of bonus payments can have a significant impact upon lending levels. So, if you have a significant percentage of your income paid in bonuses, stock allocation, or similar non-salary income streams, you may not be fully utilising these when applying for mortgage lending.
Securing a mortgage with bonus payments
We pride ourselves on our ability to put together bespoke mortgage packages for our clients, many of whom have relatively complicated multiple income streams. Our initial communication will involve clarifying your financial situation, income streams and assets and looking to see how we can best utilise these. We can then put together an array of different bespoke packages taking into account your specific requirements. Why not call us today for a no obligation chat about your situation, options and what we can do for you.