Case study: PE partner seeking flexibility

Investec Mortgage Intermediaries Team

Paid via a regular salary, bonuses and carried interest – and sometimes in a foreign currency – private equity partners tend to have a complex income structure.

These high net worth individuals also often seek mortgage solutions that allow them to free up funds to cover other expenses, or for investment opportunities.
 
When Investec recently met a client in the above situation, we were able to create a bespoke
solution that allowed the client flexibility, while also taking into account the full picture of their income situation.
 

The client

A private equity partner whose income was a mix of salary, bonus and carried interest,
all paid in euros.
 

The challenge

Our client had sold their current residence and was looking to purchase their next. They were expecting to receive a large amount of carried interest in the coming months, which they hoped to set aside to draw upon when needed, whether for tax bills or for future co-investment opportunities.
 

The solution

Many private equity partners would prefer not to tie up too much of their wealth in a mortgage.
This is often the case if they face high tax bills or they simply want to be ready to make future investments.
 
In this case, Investec was able to structure a mortgage in two parts. The first was a 15-year, interest-only revolving mortgage, which is a flexible facility secured against a client’s primary residence. Unlike a traditional mortgage, it provides freedom to access funds, up to an approved limit, as and when required. Opting for a revolving mortgage allowed our client to draw up to the mortgage limit or pay down as often as they needed to. The second part was a five-year, fixed-rate mortgage for the remaining amount.
 
We were happy to be able to find a solution to our client’s problem, meeting their needs regarding tax bills and future investment opportunities while taking a holistic view of their income – including carried interest. 

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