In our Q&A, we address some of the frequent or unusual questions posed to mortgage brokers.
Does RSU income count as income towards a mortgage?
In short, yes! We can help you find lenders who can consider this income, though many will not.
There is, however, still a good range of suitable lenders for most applicants, with rates ranging upward from some of the most competitive in the market.
If your application has been declined, or if you have spoken to other advisors who said this income isn’t acceptable, call us.
It is a complex type of income, which many advice firms may be unfamiliar with. Many lenders will not accept it, so never take being refused by a few lenders as a definitive answer.
If another advisor says it’s unsuitable, other factors may be involved. So always take a second and third opinion.
Our RSU income mortgage advice service
The criteria determining overall eligibility and how much will contribute towards your maximum loan is complex and varied.
The good news is we can help you find and arrange suitable loans with lenders who accept this income stream and calculate correctly their appropriate maximum loans whilst also ensuring that you meet all the other criteria that might be applicable.
There’s a good chance (if you receive RSU income) that you may also have other challenging factors, like non-sterling income, dual-taxation arrangements or a fixed-term contract. If you are a foreign national on a visa, this is also one of our areas of expertise, so rest assured we can help.
Our typical advice fee is only payable after a fully approved application (there is no cost in getting recommendations). So, we don’t earn anything unless an application is successful.
Our typical fee is just £299. We earn a commission from the lender (but this is built into the product), so we don’t change the rate or applicable fees. We’re whole of the market and deal with most of the lenders in the UK. We don’t typically charge a fee on remortgages.
We do not, however, deal with customers residing outside the UK. If you live overseas, we cannot assist you. Other advisors may.
Maximum income multiple available with RSU income
This question, is raised frequently. But lenders don’t just use income multiples, so you shouldn’t focus on this aspect.
Whilst most lenders have a maximum multiple (which many never publish), they usually have a myriad of other calculations as well; based on net income, other credit commitments, financial dependents and stress testing based on notional interest rates (one reason why maximum loans have decreased significantly in the current high-interest rate environment).
So, the only way to get a firm sense of how much you can borrow with complex income streams is to speak to a competent broker such as ourselves; we can check all the suitable lenders’ affordability calculations.
When it comes to complex income streams, especially those that vary month-to-month, it’s necessary to see payslips over 3-12 months, P60s and get a full breakdown of all commitments to give an accurate estimate.
If you try to preempt this with income multiples, you might either massively over or underestimate realistic borrowing levels. There is no cost involved in having an outline discussion with us. So get in touch!
Factors affecting the lenders available for RSU income mortgages
With any income that fluctuates, lenders will often look for continuity. If a monthly bonus scheme has been received in only one of the last three months, fewer lenders will accept it.
Being a UK taxpayer and being paid in sterling is a requirement for many lenders accepting RSU income, but not all. If your income is in another currency or taxed overseas, we can still help.
The length of time working for your current employer will be pivotal in the number of lenders available. If you have worked for this organisation for less than a year, fewer lenders are available.
Some lenders will only consider this income once it vests. Hence, they may be looking at income received two or three years ago. In that case, you would need to have been employed with the current firm for a long period.
What is income paid as ‘restricted stock units’ otherwise known as RSU income?
This income is quite unusual for those employed outside the tech sector. The employer pays someone part of their salary or performance-related pay in the company’s shares instead of cash.
These shares are restricted, meaning they receive them several years after being awarded, typically with a requirement to remain at the business to receive those share units.
It’s a great way for the company to create further incentives for the employee to remain at the organisation, and work to the best of their ability.
The employee has a significant part of their income riding on both remaining at the business and its long-term performance.
Why do many lenders refuse to accept this income?
The logic can be quite varied and is typically quite flawed.
Lenders will often say it’s about the volatile nature of many of the shares involved; price fluctuations in shares like Alphabet (or Google), Apple, Amazon, Microsoft, Tesla, etc might be more transient than others, but they are still some of the most valuable entities on earth.
Some lenders complain that the income is deferred and not in someone’s pocket for several years.
That could be a concern for a new starter, but (for those who have been in the job for several years), they arguably provide a greater degree of certainty that the applicant’s income continues through recessions and downturns.
They might also choose to retain the stock as an investment, but anyone paid cash could also buy shares with their income; the lender still has the same exposure.
Really, underneath the answers given by the lenders is an underlying truth; lenders have to simplify their decision-making processes and regiment these in some way (to facilitate scaling their operation).
So, only the smaller building societies or boutique private banks tend to assess each application on a ‘case by case’ basis and typically charge a premium for that service.
Most lenders, therefore, create a very defined set of rules about what is allowed, and these rules often take a long time to reflect changes in the outside world.
RSU income will likely become increasingly accepted due to its growing prevalence and the fact that it arguably offers the lender more protection than other performance-related pay.
But today, if your lender refuses to consider this income, applying via a different lender will likely be the most effective use of time, and we can help to ensure that application goes to a lender who accepts this income.