Mainstream lending is not designed to cater to these 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.
Can I use my bonus to buy a new home?
In these situations, a specialist lender like Investec could help. As a private bank focused on a small number of clients, we work hard to understand your individual circumstances and take into account your income as a whole. For example, we may be able to consider your average bonuses over the last few years when calculating how much you can borrow.
We also understand that you may receive all or some of your income in foreign currencies. With a team of specialist foreign exchange dealers, we’re equipped to help you with trades you’d like to make.
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How much can I borrow?
This might mean we can offer a higher loan-to-value (LTV) mortgage than you think. While some borrowers will repay their mortgage in monthly instalments over two decades or more, investment banking clients often have capital reductions built into their repayment plan that coincide with liquidity events such as bonuses. These are to reduce the overall LTV.
What if I want to buy a new home but haven’t sold my existing property?
In these cases, we may be able to offer an element of bridge finance where the cost of the new home is loaned and can be repaid within a short-term designated time period with no penalties for early repayment. This lending may be secured against one or both of the properties for security.
Can I borrow money to refurbish a property?
Increasing the sum you can borrow based on expected bonuses is an option we can consider, and in cases of vesting stock or deferred bonuses, our investment management expertise allows us to assess the risk profile of an underlying fund or stock so we can offer an appropriate solution.
How can I use my bonus to offset mortgage repayments?
For example, some of our clients will take out interest-only mortgages with a high LTV and repay the balance through regular capital reductions. Others have repayment mortgages with the flexibility to make overpayments throughout the year.
In some situations, we might offer a revolving mortgage, which gives 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.
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 the client earned his income in USD.
We were able to consider his salary; average cash bonus over three years; and average deferred stock over three years to calculate his total annual income.