Through our personal relationships with investment banking clients, we understand how your income might be structured differently to other professions. Your bonus might constitute a significant proportion of your income, and you may receive some or all of this income in foreign currency.
Mainstream lending is not designed to cater to an investment banker’s specific financial needs. So, if you’re due to receive a bonus and want to leverage it to buy a home or refurbish your current property, you may have questions about how to do this. Here, Private Banker Zoe Ross explains more.
Can I use my bonus to buy a new home?
Zoe: While it’s sometimes the case that as little as 30% of an investment banker’s income comes from annual salary, affordability assessments performed by mainstream mortgage providers often undervalue bonuses when calculating how much you can borrow. This is when a specialist lender like Investec could help.
As a private bank focused on developing personal relationships with a small number of clients, we work hard to understand your individual circumstances and can consider your income holistically. For example, we may be able to consider your average bonuses over the last few years when calculating how much you could borrow.
We also understand that you may receive some or all of your income in foreign currency. With a team of specialist foreign exchange dealers, we’re equipped to help you monitor the markets, hedge your exposure and make trades when agreed rates are met.
How much could I borrow?
Zoe: The amount you could borrow is unique to you. We look to offer you a mortgage that is affordable and reflects your true financial circumstances. By leveraging bonus income, we may be able to provide a higher loan-to-value (LTV) mortgage than you think.
We look to offer you a mortgage that is affordable and reflects your true financial circumstances. By leveraging bonus income, we may be able to provide a higher loan-to-value (LTV) mortgage than you think.
How can I use my bonus to offset mortgage repayments?
Zoe: We understand that a standard monthly repayment schedule is not always the most suitable for your needs. We work with our clients to provide repayment terms that align with their circumstances and liquidity events. For example, some of our clients will take out interest-only mortgages with a high LTV and repay the balance at times that are tailored to their cashflow. Others have repayment mortgages with the flexibility to make overpayments throughout the year.
In some situations, we could offer a revolving mortgage, which could give you the freedom to access more funds whenever you need to. Our revolving mortgage clients can make multiple withdrawals (up to an agreed limit) and then make unlimited repayments.
What if I want to buy a new home but haven’t sold my current property?
Zoe: The time-consuming process of selling your current property can be challenging for busy finance professionals and we appreciate there may be times you want to buy a new home before your current property has sold. In these cases, we may be able to offer a Home-Link mortgage, where lending may be secured against both properties on the understanding the existing property will be sold within an agreed timeframe to reduce the overall balance.
Can I borrow money to refurbish a property?
Zoe: Increasing the sum you could borrow based on expected bonuses is an option we could consider and, in cases of vesting stock or deferred bonuses, our investment management expertise could allow us to assess the risk profile of an underlying fund or stock so we could offer an appropriate solution.
Case study: an interest-only mortgage with high LTV
A senior investment banker approached us to secure a mortgage for a family home in the UK. After living and working overseas for several years he wanted a property he could settle in, but his income structure was complex and he earned his income in USD. Alongside his salary, we were able to consider his average cash bonus over three years and average deferred stock over three years to calculate his total annual income.
We provided a £6.27 million interest-only mortgage, with mandatory capital reductions to bring down the LTV to 75% by year five and 65% by year ten. After year ten, the mortgage will continue to run on an interest-only basis, with the flexibility to make capital reductions on a self-managed basis whenever the client receives a cash bonus, vesting stock or surplus income.
Please get in touch to find out more about private banking for investment banking professionals.
Your property may be repossessed if you do not keep up repayments on your mortgage. Investec residential mortgages are only available for residential properties in England or Wales and are
primarily available to UK residents and subject to eligibility.