80% LTV on £2.8m for city banker with irregular bonus income
The situation?
I was recently approached by my UK based banking clients – they were established and wealthy professionals – looking to arrange a high-value mortgage for their new residential purchase.
The clients planned to acquire a stunning prime central London apartment and had been assured that if they could complete within 6 weeks, the price would be discounted. They were looking for 80% loan to value (LTV) on £2.8m.
The clients had a complex income structure where both received a base salary and also benefitted from substantial, large bonuses at irregular intervals across the year.
The client’s complex income structure combined with the required high LTV meant prospective lenders needed to holistically assess affordability, by looking at a track-record of previous year’s earnings. The clients’ combined annual bonuses were much greater than their base salaries, which was a concern to some lenders because there is a greater emphasis on variable income which can fluctuate depending on business performance. Typically, most lenders would prefer to see a strong salary and then consider any bonus income as a pleasant addition when assessing affordability for a loan of this size. Furthermore, the clients and I also agreed that a mortgage that incorporated some form of interest only would likely be the most suitable option for their situation to better ease cashflow across the course of the year. Interest only mortgages at higher LTV ratios can be particularly challenging to secure.
The solution?
Due to the complexities of this case, the client and I had been working with each other for the 6 months prior to the required completion date. I had already prepped the client with what necessary documentation lenders and solicitors etc would need so that they were ready to go once the right opportunity became available.
In addition, I was already familiar with the clients income structure and had built up a profile of historic earnings and bonus patterns and pre-agreed the case via a direct discussion to an underwriter facility that we as a firm have access too. This was to save on execution time.
Once the property had been found, I was delighted to have everything already in place for a smooth application. We achieved a competitive 5-year fixed loan, with longer-term security. A majority of the loan balance was on an interest only agreement, with a small capital repayment top-up. This offered my clients greater flexibility to support cashflow with the option to overpay as and when bonuses were delivered across the year.
Following completion, the client informed me that they had previously been let down in their search for property finance so given our ability to deliver this solution in such a timely fashion, they were extremely happy with the outcome and their new home purchase.