Comment: Tailoring your approach to clients with a complex income

Those seeking to access mortgage finance are certainly raising the level of complexity for lenders due to changing work patterns, lifestyle and the sources of income included in applications. For instance, the average UK worker is more likely than ever to switch jobs and careers and follow multiple pathways to achieve that all-important work/life balance.

One of the main drivers of change in the UK has been the growth in the number of self-employed workers; 4.8 million people in the UK are currently self-employed, accounting for 15 per cent of the total workforce. However, despite workers embracing new flexible work patterns, those assessing mortgages applications still prefer the traditional types of employment.

For many mortgage providers, flexibility can just be another word for instability. Irregular and variable rates of pay, and the risk of no formal contract, has caused some lenders to become weary or belligerent when assessing self-employed workers or those who include other sources of income outside of the monthly pay check.

What’s more, the term ‘self-employed’ can cover a multitude of jobs and roles, from entrepreneurs, and professional contractors to a sole trader or a company director. The differing seniority in these roles – all still under the umbrella term of self-employed – makes it difficult for mainstream lenders to apply the same existing criteria to each application.

The 9-5 and the 5-9

More than 1.1 million workers in the UK have a second job, meaning multiple income streams need to be factored into mortgage applications.  Despite this, many mortgage providers remain unable or unwilling to do so. This can be evident when borrowers seek to supplement or use other sources of income apart from PAYE such as commission, bonuses, overtime, pensions, personal allowances, employee benefits and dividends. However, an often unpredictable rate of income from one month to the next has meant that many lenders are unable to factor this into the affordability assessment as part of the application.

Removing the reels of red tape and adapting to unique applications

All is not lost for those self-employed or workers with a complex income looking to get on to the property ladder. Specialist lenders, who have a wealth of experience and expertise in dealing with unusual or more complicated cases, can often help. For brokers who often deal with self-employed clients, maintaining good relationships with specialist lenders are key to benefit from their flexible criteria and collaborative style of working when dealing with complex cases.

In unfamiliar territory many mainstream lenders require broader criteria and for mortgages to be underwritten by an expert from the sector. For brokers, this could also mean working with an accountant to help clients provide a track record of income and make a case for projected future earnings.

Case Study

In one example, we received a residential application for a loan of £1.5m for a six-bedroom semi-detached property in London. The applicant was employed as a lawyer with an international law firm and was seeking to use income drawn from the Limited Liability Partnership. We received formal confirmation from the finance director of the LLP that detailed basic salary and bonus payments received, which supported the amounts detailed in the application. The finance director of the applicant’s LLP also provided the underwriter with income structure over the last three years, which showed an increase year on year.

Due to the complexity of the income used in the application and the size of the loan, the case was referred to our trading credit committee. As the case had accurately evidenced affordability and the income used, we were happy to provide funding on this basis.

As the workforce continues to evolve, so too will the mortgage market. Brokers who have established relationships with specialist lender and are experienced in taking on complex cases are best placed to provide genuine advice and find solutions for their clients, no matter the nature of their employment or how much their income differs from one month to the next.

Adrian Moloney, Sales Director at OneSavings Bank



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