Islay Robinson explores how different lenders assess bonus income, restricted stock units (RSUs) and carried interest when arranging mortgages for high-net-worth borrowers.

For borrowers with straightforward salaries, mortgage affordability is often relatively predictable.

For high-net-worth professionals, the picture is usually far more complex.

Investment bankers, private equity professionals, technology executives and entrepreneurs frequently receive a significant proportion of their remuneration through bonuses, equity awards or carried interest rather than fixed salary.

The challenge is that lenders do not all assess these income sources in the same way.

Two lenders reviewing the same borrower may reach very different conclusions based on their individual underwriting policies.

Bonus Income

Annual bonuses are widely recognised across the specialist mortgage market, but the method of assessment varies between lenders.

Many will request several years of bonus history before deciding how much of that income they are prepared to include for affordability purposes.

Some lenders may consider an average over previous years, while others may place greater emphasis on recent performance or longer-term consistency.

The overall trend of the bonus history often matters as much as the figures themselves.

A stable or increasing track record can provide greater confidence than income that has fluctuated significantly from year to year.

Presenting bonus income alongside supporting context, such as career progression, employer history and compensation structure, can help lenders build a clearer understanding of the application.

Restricted Stock Units (RSUs)

Equity compensation has become an increasingly important part of remuneration, particularly within technology and financial services.

Some lenders are comfortable considering vested or regularly vesting RSUs as part of the overall affordability assessment, particularly where they form an established element of the borrower's remuneration package.

Others may place greater emphasis on fixed salary, while viewing equity awards primarily as part of the wider balance sheet rather than recurring income.

Treatment varies significantly between lenders and depends on factors including the employer, vesting history, share liquidity and the borrower's overall financial position.

Carried Interest

Carried interest remains one of the most specialised forms of income encountered in mortgage lending.

Unlike salary or annual bonuses, carried interest is typically linked to fund performance and may be realised over extended periods.

As a result, many mainstream lenders find it difficult to assess using standard affordability models.

Some private banks and specialist lenders with experience of private equity clients may take a broader view, considering factors such as fund history, expected distributions, wider assets and overall financial profile when assessing the application.

The approach depends entirely on individual lender criteria and the specific circumstances of the borrower.

Choosing the Right Lender

One of the biggest misconceptions in high-value lending is that every lender views income in the same way.

In reality, underwriting approaches vary considerably.

The most appropriate lender is often the one whose credit policy aligns most closely with the borrower's remuneration structure.

Selecting the right lender at the outset can help avoid unnecessary applications and create a more efficient underwriting process.

The Bottom Line

Variable compensation should not automatically be viewed as a barrier to obtaining a mortgage.

The key is understanding how different lenders assess different forms of income.

For borrowers whose remuneration includes bonuses, RSUs or carried interest, lender selection becomes every bit as important as the financial profile itself.

In my experience, successful applications begin by identifying the lenders whose underwriting philosophy best reflects how that income is earned.

Disclaimer

This article is provided for general information only and does not constitute financial, mortgage, tax, legal or investment advice. The views expressed are those of the author and are intended for educational purposes only.

References to lender policies, underwriting approaches, affordability assessments and income recognition are illustrative only. Individual lender criteria vary and may change over time.

Enness Global acts as a broker and not as a lender. Independent financial, legal and tax advice should always be obtained before entering into any mortgage or property transaction.

Your home or property may be repossessed if you do not keep up repayments on a mortgage or any debt secured against it.