Working in investment banking can often mean your income is structured differently to in other professions. Your monthly salary might make up just a fraction of your total income, which is instead paid through bonuses or profit distribution. And you may receive some of this income in foreign currency.

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?

It’s sometimes the case that as little as 30% of an investment banker’s income can come from annual salary, but the affordability assessments performed by mainstream mortgage providers sometimes undervalue bonuses when calculating how much you can borrow.

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.

How much can I borrow?

The amount you can borrow will be tailored specifically to you. But, by leveraging your bonus income rather than borrowing based on your salary alone, you may be able to borrow more than you could through a mainstream mortgage provider. While some banks typically lend up to four times your annual salary, we aim to offer you a mortgage that is affordable, but reflects your true financial circumstances. 

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?

Selling an existing property can be time-consuming and this can be challenging for busy finance professionals. With this in mind, there may be times you want to buy a new home before a previous property has sold.

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?

Just as when you apply for a mortgage, Investec can consider your bonus income – and your income from other sources – if you choose to seek finance for home improvements.

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?

Our extensive experience with investment banking professionals has shown that a standard monthly repayment schedule is not always the most suitable for your needs. So, 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 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

The requirement:

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.  

The solution:

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.

Disclaimer: This piece is intended for information purposes only and does not constitute advice. Minimum eligibility criteria applies. Your home may be repossessed if you do not keep up repayments on your mortgage.

For more information about how we can help you with your private banking needs, please get in touch today.