Buying a house can be tricky at the best of times, but if you own your own business, are self-employed, or work in private equity, the process can be more difficult still. Why? The first stumbling block is income.
Some lenders' application processes may be fairly black and white: you either meet the criteria or you do not. They may typically look for consistency in the income an individual receives, and this is much easier to demonstrate if you are a salaried professional with a basic income written into your contract.
If your arrangements are more complicated, however, not every lender has the expertise in-house to understand how you would make the repayments on the mortgage. For self-employed entrepreneurs, for example, your income profile may have a complex structure that includes a basic income and company dividends.
Many people who work in private equity, meanwhile, will take home high bonuses and also have carry income, rather than a straightforward PAYE income. Since these income streams are likely to be more irregular and volatile than a basic salary, they can make it more challenging to get a mortgage in the first place.
The second issue comes down to the type of mortgage entrepreneurs and private equity professionals, for example, may want. If you are in private equity, you are likely to have complex investments, perhaps offshore, and tax planning may be front of mind.
As you may not want to liquidate these assets (and are likely to be capable of making substantial capital repayments in the near future), you will typically want a higher loan-to-value mortgage to begin with, and then to bring that loan-to-value down rapidly via the income these complex investments generate.
Such deals require a bespoke lending structure that is not typically off-the-shelf.
So what is the solution? For entrepreneurs and private equity professionals, it could be worth approaching a private bank. Typically, a private bank will have a better understanding of more diverse income streams, and will have the expertise and resource to assess an application by its merits on a case by case basis.
Private banks are also more likely to underwrite bespoke mortgages, better suited to the lifestyle of an entrepreneur or private equity professional. Many have misconceptions about who can use the services of a private bank, however.
While each private bank has its own eligibility criteria, not all include a requirement for an individual to have a certain amount invested with them before they will offer other services, like mortgages.