Complex income:
Non-standard income
Some applicants have substantial financial resources without receiving a conventional monthly salary. Income may come from investments, equity awards, carried interest, pensions, trusts or several sources operating together.
These cases often require individual underwriting because mainstream affordability systems are principally designed around salaries and traditional self-employed income that their underwriters see on a daily basis.
Investments
Investment income can include dividends, interest, fund distributions and regular portfolio withdrawals. Some lenders use the income actually received and declared for tax.
A small number can also notionally monetise investments that the applicant does not intend to encash. Instead of requiring regular withdrawals, the lender uses the portfolio’s value to calculate a notional annual income for mortgage affordability.
The lender will normally apply a “haircut” to allow for market movements and reduce the value available for the calculation. It may then:
Divide the reduced portfolio value by the mortgage term
Apply a specified annual percentage to the reduced value
Use its own assumed sustainable withdrawal rate
Where the portfolio is divided by the mortgage term, a shorter term can produce a higher notional annual income—although the resulting mortgage payments will also be higher.
The portfolio’s size, composition, volatility, accessibility and ownership all matter. Cash and mainstream listed investments are generally easier to assess than concentrated, unlisted, restricted or highly volatile holdings.
The same assets cannot always be used both to generate affordability and repay an interest-only mortgage. The lender will need to be satisfied that the proposed treatment does not rely on the portfolio twice.
RSUs and vested shares
Restricted Stock Units (RSUs) are promises to deliver shares—or sometimes their cash equivalent—when specified vesting conditions are met.
Unvested awards are normally given little or no weight. A limited number of lenders can consider RSUs that have vested and been received consistently.
The assessment may include:
Two or three years’ vesting history
The future vesting schedule
Share-price and currency movements
Tax deductions
Sale restrictions
Whether the employer is publicly listed
The likelihood of continuing awards
Shares that have already vested and remain owned by the applicant may instead be treated as investments. The appropriate approach depends on whether the application relies on recurring awards, dividend income or the value of the holding.
Carried interest
Carried interest is a share of investment profits commonly received by senior professionals in private equity and related sectors.
Its timing and value may depend on fund performance and successful exits. An established receipt history, fund documentation and evidence of future entitlement can strengthen the case, but the lender market is limited.
Pensions and trusts
Established pension income is widely accepted, but undrawn pensions, flexible drawdown and discretionary capital withdrawals require more specialised treatment.
Trust income may be fixed, guaranteed or entirely at the trustees’ discretion. The lender may request the trust deed, distribution history, tax documents, trustee confirmation and evidence of the trust’s underlying assets.
High-net-worth applicants
High-net-worth applicants may be able to demonstrate affordability through substantial assets, liquidity and a broader private-banking relationship rather than conventional income alone.
Private banks and selected specialist lenders can sometimes monetise investments or assess the applicant’s complete wealth position. Minimum loan sizes, assets under management or additional security may apply.
Multiple income streams
An applicant may receive salary, bonuses, rent, pensions, investments, trust distributions and overseas income simultaneously. No single source may support the mortgage, while the combined position does.
The challenge is establishing which sources can be combined, whether each is sustainable and whether any income or assets are being counted twice.
An experienced specialist mortgage broker can turn several disconnected sources into one coherent, properly evidenced affordability case.
Frequently asked questions.
Every client and every mortgage is different, but there are some questions we are asked regularly.
From affordability and deposits to complex income, expat mortgages and specialist property finance, our FAQs explain how different lenders may approach different circumstances.
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