Mortgages for Investment Bankers: What You Need to Know

At first glance, you might assume that because investment bankers often have high earnings, it would naturally follow that investment bankers would be able to easily secure a great mortgage deal – right?

In reality, due to the complex earnings structures of investment banking, with bonuses and additional commission on top of base salaries to consider, an investment banker might find applying for a mortgage more complex than initially thought.

Fortunately, there are mortgages for investment bankers that can be tailored to accommodate these unique financial circumstances. In this article, we guide you through everything you need to know as an investment banker, from understanding lender criteria and affordability calculations, to specialist mortgage options that are on the market today. Let’s jump in.

Benefits of a Mortgage for Investment Bankers

The primary benefit for investment bankers when looking for a mortgage is their current and potential earnings. With a higher-than-average earning potential, and a typically high base salary rate, many lenders will look favourably on investment bankers and will be much more likely to offer larger loan amounts at more competitive rates.

In addition, thanks to a strong financial profile, lenders are much more likely to be able to process approvals faster. Resulting in a quicker overall application timeline from application to approval.

A key point of consideration that needs to be highlighted is specialist lenders. As an investment banker, you are likely to have varying types of income. This can include stub bonuses, end-of-year bonuses, additional commission, and even restricted stock units (RSU), all of which ideally needs to be calculated in your affordability assessment.

As we will touch on soon, unfortunately, there are many lenders that will not accept fluctuating incomes or multiple income streams to be included in the overall affordability calculations. As such, it is vitally important that you find a mortgage lender that understands the unique financial income structure of an investment banker, and can match your mortgage to your needs.

Challenges of Getting a Mortgage as an Investment Banker

Paradoxically, the most beneficial aspect of being an investment banker can also be seen as a disadvantage by some lenders.

The caveat to an investment banker’s strong financial standing is the nuances in the structure of multiple income streams and how lenders will assess variable income.

While having a base salary is straightforward for lenders, those who have multiple incomes with a fluctuating overall income can be more difficult to assess. As such, many high-street lenders will have stricter criterias surrounding the affordability calculations, and may hesitate to offer advantageous deals or competitive mortgage rates to borrowers with unpredictable incomes – regardless of the true earning potential.

Income Categories that Financial Bankers Need to Know for Their Mortgage Application

Before applying for a mortgage as an investment banker, it is important to understand exactly how your income will be calculated in a mortgage affordability assessment.

With a variety of income streams, including base salary, bonuses, commission, and restricted stock units (RSU), understanding how each income category is evaluated can give you a massive advantage in securing a better mortgage deal.

Let’s explore each type of income and its corresponding relevance in finding the best lender for your mortgage application:

Base Salary Income

Perhaps the simplest and most straightforward type of income, base salary income, refers to a fixed income that is earned as an employee for their work. Due to its reliability and predictability, base salary is the most common income that lenders will work on to calculate your mortgage affordability.

However, for investment bankers, though a fixed salary will likely still form the foundation of their mortgage application, it may not be the only source of income. Unfortunately, many high-street lenders will overlook forms of additional income, leaving your fixed-salary as the only eligible amount to calculate your affordability. As such, it is vital that you choose a lender that understands the complexities of income associated with investment banking.

Bonuses

Receiving bonuses can be a mainstay for an investment banker, and so it could be crucial that this is factored into your overall affordability calculations. While on the surface a bonus from a compensation package will bolster your overall income, their impact on mortgage applications can vary from lender to lender.

Essentially, an ideal borrower for a lender is a high-wage earner with a consistent income. Bonuses can be seen as temperament or ‘additional’, in the sense that they are not always guaranteed. As such, it is important that your application demonstrates the consistency and total amount earned through your bonuses.

Lenders will still favour applicants who have a long history of receiving regular bonuses, as this adds an element of consistency and therefore reliability to your overall mortgage application. It is always best practice to work with a trusted whole-of-market broker – like Boon Brokers – to ensure you find a lender that will include additional incomes into your mortgage affordability calculations.

Commission

It goes without saying, commission can lead to a significant source of income. However, similar to that of bonuses, commission payments can be subject to change, making the overall income from commission difficult to quantify in the future. As a result, many lenders will be reserved in how they approach commission income when calculating affordability and will require sufficient evidence to assess its reliability.

Working with a specialist lender who can cater to your financial circumstances can greatly improve your proposed overall income on your mortgage application, enhancing your borrowing power significantly.

To improve the chances of commission incomes being accepted, it is best to provide clear documentation that demonstrates a commission earning structure with evidence of earnings over the last few years. This can include contract details, payslips, or tax records.

Restricted Stock Units (RSUs)

One of the most common forms of compensation for investment bankers are Restricted Stock Units (RSU), and they can often contribute towards a large portion of an investment banker’s overall earnings. RSU are usually subject to a vesting period, at which time, the holder can choose whether to keep the shares or sell the stocks back to the company.

When it comes to a mortgage application, RSU will be treated differently from lender to lender. Generally speaking, it is difficult to find a lender that will include RSU in your mortgage affordability calculation, especially if the stock is still vested. However, there are some specialist lenders who will consider RSU in your overall affordability calculations, should they already have passed the vesting period.

Again, due to the importance and benefits that each of these additional income streams can provide, specialist mortgage lenders are a key staple for investment bankers to find the best mortgage deal. At Boon brokers, we have worked closely with leading-lenders and specialist lenders alike, and we know how important it is to find a lender that will account for different income streams.

How Much Can an Investment Banker Borrow?

It is difficult to provide an exact figure as to how much an investment banker will be able to borrow, as the amount will wholly depend on their specific income and financial standing. Generally, however, lenders can offer between 4.5 to 6 times an annual income, with higher earners being rewarded with higher-end of this multiple.

With any mortgage lender, your borrowing amount will be predicated upon your affordability assessment. This will take into account your income, deposit size, credit score, and financial history.

There are tools – like our affordability calculator – that can help provide you with a rough estimation of your potential borrowing amount, but we have additionally provided some estimations below based of different salaries investment bankers hold in the UK:

• Entry-Level Corporate Investment Banker (£30,000 – £40,000): Borrowing potential of £135,000 – £240,000
• Investment Analyst (£100,000 – £150,000): Borrowing potential of £450,000 – £900,000
• Investment Associate (£200,000 – £300,000): Borrowing potential of £900,000 – £1.8 million
• Investment VP (£350,000 – £450,000): Borrowing potential of £1.57 million – £2.7 million

Please note that these figures are only estimates. Your exact borrowing amount will be specific and tailored to you and your decided lender.

What are the Lender’s Criteria for Investment Bankers’ Mortgages?

As we’ve previously mentioned, lenders will evaluate a variety of factors when assessing mortgages for investment bankers, and each lender will have their own unique criteria that applicants will need to reach.

For example, while some lenders will focus solely on salary, other specialist lenders – like investment mortgage lenders –  may take a percentage of bonus and commission earnings into account. Of course, it goes without saying, those who have a history of stable employment accompanied by a strong financial profile will always be more likely to secure the best mortgage offers and terms.

Additionally, deposit requirements can also vary, particularly for larger loan amounts. In some cases, lenders will provide better mortgage rates depending on the higher deposit.

A strong credit profile also plays a significant role in determining eligibility. That’s why it is always advised to first check your credit status before completing a mortgage application. You can do this through Checkmyfile, which will provide a comprehensive overview of your credit score.

Working with a trusted whole-of-market broker is always the best method of matching your financial situation to the best mortgage product available. When you work with a whole-of-market broker, you will be guided through the entire mortgage application.

Get Expert Mortgage Advice for Investment Bankers

The mortgage market today is complex, and with a variety of new mortgage products and lenders entering the scene, it can be extremely difficult to find a lender that understands your needs. Fortunately, finding a mortgage lender doesn’t need to be complicated for investment bankers.

Understanding the exact requirements of an investment banker, here at Boon Brokers, we can guide you through the entire process of finding you the best mortgage that suits your needs. As a whole-of-market and trusted broker, we have a wealth of experience working with both leading and specialist lenders, and can help you access the entire mortgage market to find the best match for you – completely free!

Contact Boon Brokers today – our expert mortgage advisors are waiting to help you secure the mortgage that is tailored to your needs.