Many firms will follow a 'lockstep' salary structure, with all lawyers who become Partners in the same year typically earning equal compensation. But others may offer a 'merit-based' pay system that links remuneration to performance metrics, such as the number of hours billed or the amount of new business brought in.
The unpredictability of some Partnership paths means a lawyer's verifiable income, both past and present, may not match their potential earnings. With more stringent lending criteria in place since the Mortgage Market Review, even HNWIs such as Partners can face challenges securing high LTV mortgages if they have niche or complex requirements.
The client was a Partner at a Magic Circle law firm who intended to sell their existing property and purchase a family home outside London.
The client's existing property was on the market but had not sold by the time they wanted to purchase their new home. While the sale of the client's existing home would be partially used to pay down the mortgage, the client was still looking at an initial 90% LTV. Our client was progressing along the Partnership path, so their previous and current earnings certainly didn't reflect their future potential.
Here at Investec Private Bank, we understand the unique income profile of lawyers who have become Partners at their firm.
We were able to examine our client's earnings over the last three years and take the average of the three. We were also able to compare the client’s salary against equivalent Partners at the firm to build a picture of earnings for the 2018/19 financial year. This holistic approach gave us a much stronger picture of our client's earnings and ability to service the mortgage.
Furthermore, we structured the mortgage in two parts to better fit the particular needs of the client. The majority of the loan facility was confirmed at a fixed rate, while the second portion was placed on a variable rate, which was to be repaid within two years - once the client's existing property had sold. The first part of the mortgage was also set as interest-only for the first two years to reduce the client's outgoings while they sold their current home.
Here at Investec Private Bank, we're committed to relationship-driven lending, which means our mortgage intermediary team takes a broader look at an applicant's individual financial strengths when deciding the best options for clients. On this occasion, we were able to pull a rabbit out of the hat for a Magic Circle Partner with sophisticated mortgage requirements.