I was approached by a couple who were struggling to find a lender who would agree the large mortgage they needed to fund their new home purchase. While my client had a stable job as a trader in the City of London his basic salary was relatively low and his bonuses formed around 75 per cent of his total income. Lenders typically find it challenging to consider bonuses as income as it is an inconstant stream.
Having failed to agree a mortgage on a previous house my clients had lost the property to another buyer. They were keen for this not to happen again and so wanted me to agree their 750k large mortgage on a property valued at just over £1 million quickly in order that they could proceed. This also made the loan to value requirement 75%.
Many lenders would not consider this loan as it represented a stretch of around five times the client’s income. With the bonuses being consistent but not guaranteed, many banks were reluctant to agree a mortgage of this size even though my clients were putting down £290,000 from their own savings as a deposit.
However, using my underwriting connections, I spoke to a senior underwriter who was prepared to stretch the lender’s normal criteria and agree the full 750k large mortgage loan. This was done on the basis that my client had a deferred bonus set to be paid in the next few months and because his employment was with a well-known company and had been stable and consistent over 15 years.
The lender was prepared to lend £520,000 on an interest only basis – equivalent to 50 per cent of the property value – while the remaining £230,000 was on a capital and interest basis. The clients benefited from a three year fixed rate at a competitive 3.49 per cent and the lender did not require any further collateral or any assets to be transferred to their management.
Clients often turn to us because we have access to underwriters who are prepared to consider an income stretch for City clients with large bonuses. This certainly helped my clients in this instance obtain the 750k large mortgage.